There will be little Christmas cheer for pensioners, self-funded retirees and other older Australians living off their investments as the Reserve Bank’s latest rate cut eats into their already reduced income, senior lobby groups say.
More than one million people who fall into this category, including those who depend on term deposits for their income, could be losing an amount equivalent to 25 per cent of a person’s wages after a series of rates cuts since November last year, National Seniors chief executive Michael O’Neill said.
‘‘Over the past 18 months, we’ve seen a reduction of about 1.75 per cent from about 6 per cent, so it’s over 25 per cent reduction in the interest rate on offer,’’ Mr O’Neill said.
‘‘Some pensioners might have $5000, $10,000 or $15,000 put aside in term deposits, so they are impacted through to those would might have substantially more than that and are totally reliant on it.
‘‘[There’ll be] no Christmas cheer for folk in that situation, compared to people like mortgage holders.’’ Greg Williams, a part-pensioner who lives on the NSW south coast, said he and his wife would face an income cut of about $12,000 due to a lower interest rate on his term deposit.
‘‘We’re going to concentrate on essentials only, that’s it. We’ve got to tighten our belts,’’ Mr Williams said.
Pensions stay at the same level in the short term, so retirees might have to pay for higher prices if the lower interest rate leads to an inflationary push, Combined Pensioners and Superannuants Association senior policy adviser Amelia Christie said.
Mr Williams said he was also frustrated that the deeming rate, which is used by the government to gauge a person’s earnings on their investments, had not changed since 2010.
Pensioners were still being assessed as earning about 4.5 per cent from their investments, while current rates meant investments were yielding earnings closer to the 3 per cent mark, he said.