Despite continued record low interest rates, there’s still a place for term deposits in an investment portfolio. This article discusses why TDs are still being used and offers a few tips for readers to get the most out of their term deposit.
In 2011, the average term deposit could earn you around 6 percent per annum. Since then, the times, they have a-changed – and so have term deposit rates.
Since the Global Financial Crisis (GFC) we remain a little nervous around risk, so despite average term deposit rates now being closer to 2.5 percent, they’re included in financial portfolios for the capital security and diversification components they offer.
The Reserve Bank of Australia (RBA) sets the cash rate via its monetary policy. The aim is to stimulate the economy by making savings accounts and term deposits unattractive and make borrowing cheap to encourage consumers to spend.
Generally this kind of monetary policy only lasts a couple of years which is why so few economists foresaw the protracted period of low rates we are experiencing.
To download and use this content, make sure you're logged in then hit the Download button and choose 'Save as' to keep the document.