INTEREST RATES

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At its last meeting the Reserve Bank dropped rates to 1.75% due mainly to lower than expected inflation figures.  Yes, these are historical lows but make no mistake the trend is still downwards. Consequently, expect property prices and share markets to continue doing well, and be very wary about fixing your home loan interest rate.

Falling rates will make it even more difficult for people who have relied on bank interest all their lives and who have been too frightened of growth investments to invest in shares. In the recent Budget is has been made very clear that $1.6 million is the most you will be allowed to accumulate in superannuation pension mode. A sum of this magnitude would take you way outside age pension eligibility but if interest rates fall to 1%, which is possible, you need to live on your capital to survive.

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