Today’s chart comes from our own Rumplestatskin, who has received many requests to compile a chart comprising the real (i.e adjusted for inflation) after tax (RAT) returns on term deposits for Australian investors (click to enlarge full size):
It’s quite obvious that savers have been punished since the secular shift from the turn of the century (observable worldwide, largely as a result of Greenspan reinflating risk markets post-NASDAQ bubble) to effectively zero return on their capital.
The behavior of private savers is shown clearly in the RBA’s Household Savings Ratio (HSR) chart, updated from the Chart Pack released last week:
The secular decline in savings culminated in rational dissaving in the early noughties, leading to an increase in secondary asset (e.g houses and shares) values, before reversing to the current “dis-leveraging” and rising HSR, well over 10% of income, even though the cash rate has returned to below average nominal lows:
This behaviour of increased savings during low or zero interest rate policy (ZIRP) with subsequent negative RAT returns is the antithesis of common economic wisdom where such conditions should increase investment in risk assets and spur economic activity.