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'Real' returns for savers heading close to negative

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The situation facing people who rely on interest income is increasingly bleak: returns are worryingly close to negative in "real" or inflation-adjusted terms.

As illustrated in the accompanying chart, the days of getting decent returns from term deposits, which tend to offer the most competitive bank interest rates, are long gone.

Even if you hunt around for the "specials" offered by major banks, latest Reserve Bank of Australia figures show the average return you will get is only a tad above 2 per cent, which is higher than the 1.3 per cent inflation rate – but only just.

And these skinny returns may well fall further, as the banks respond to last week's 0.25 percentage point cut in official interest rates, and market expectations of more cuts to come.

How long will this slump last?

Interest rates on term deposit "specials" are still marginally higher than inflation.Credit:Josh Robenstone

Unfortunately for savers, it's unlikely there will be a lift in returns from bank deposits any time soon. That's because returns on bank deposits are a........

© Brisbane Times