Who Speaks For Interest Rate Rise Winners?

As usual media coverage of the Reserve Bank cash rate decision last week was dominated by the impact on households with mortgages and pleas from business lobby groups to keep rates where they are.


This article was originally commissioned by ABC Online & published on The Drum Unleashed “A low rate world is not in everyone’s interest”. It’s republished here with permission from my editor at the ABC.

Sydney’s Daily Telegraph went so far as to plead in an editorial to the RBA “to make Tuesday, August 2 a rate rise-free day … given the stress households and small businesses are under due to the rising cost of living” which prompted Assistant Professor in Journalism at the University of Canberra Jason Wilson to wonder “is the dumbest campaign I’ve ever seen? maybe” , followed by a tongue in cheek comment “I have no mortgage, only term deposits. which tabloid is campaigning for me?”.

A substantial group in our society are largely unrepresented in interest rate discussions because “1.6 million Australians live off investments, money from selling property, interest earned on money in the bank”.

During a speech at the 2008 14th Biennial National Conference of Independent Retirees Liberal Senator for Queensland, Sue Boyce noted that “not everyone is grateful when interest rates fall” (PDF).

I interviewed Robert Curley, Director in charge of policy development at the Association of Independent Retirees (AIR), who told me that the federal government has a view that more people should self fund their retirement. Curley explained that a large portion of AIR members live on less than Average Weekly Earnings (AWE) and “most retirees don’t have borrowings” so the ideal situation for his members is “high interest rates, low inflation and investment growth”.

The typical AIR member “cheers when interest rates go up and cries when they go down” but also watches inflation closely because increased inflation can erode or wipe out any of interest rate rise gains, resulting in a flat or negative effect on deposit based income streams.

Associate Professor of Economics & Finance at the University of Western Sydney Steve Keen told me he keeps a close eye on the issue and in his view:

“Low interest rates help those in debt, but they squeeze the retirement incomes of the aged and are causing hardship now to many in the USA & Japan who thought they’d planned well for their retirement. Older Australians will be next if, as I expect, the RBA will forced to cut rates in future when our home-grown private debt binge causes an economic slowdown.”

According to the Australian Institute for Social Research executive director John Spoehr “the rate of baby boomers retiring over the next five years accelerates and peak around about 2015 or 2016”, so this segment of society which hopes for rising interest rates to increase their income will increase markedly in numbers.

Retirees in their 60’s who may live to an age of 90+ need income to last that long to ensure financial security. Let’s see if the media pays more attention to their cause in the next few years.


One response to “Who Speaks For Interest Rate Rise Winners?”

  1. splitnekretnine

    It is very simple equation – do not spend what you do not have

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