Savers sacrificed at the low interest rate altar

Last week’s national accounts release for the December quarter revealed that Australian households accumulated a record $187 billion of savings in calendar year 2020 as they cut back spending (due to COVID restrictions) and banked enormous amounts of stimulus.


Australian households have accumulated a massive savings war chest.

The problem for these savers is that deposit rates have fallen to a fresh all-time low according to new indicator deposit rates data released by the Reserve Bank of Australia (RBA).

The average 1-month term deposit rate was just 0.05% in February, whereas the average 3-month and 6-month term deposits fetched only 0.10% and 0.20% respectively:

Average short-term deposit rates fell to a record low in February 2021.

At the longer end, interest rates on 1-year and 3-year term deposits remained at a record low 0.30% and 0.35% respectively in February:

Longer-term deposit rates remained at a record low in February 2021.

Meanwhile, the average interest rate across all deposit terms was a record low 0.20% in February 2020, a massive change from the 5.20% earned just prior to the Global Financial Crisis in June 2008.

If you add inflation (CPI) into the mix, which was 0.9% in the December calendar year, then Australian savers are going backwards in real terms.

This is the RBA’s goal after all. They want people to go out and spend to support the economy.

Therefore, a large chunk of the $187 billion saved by households in 2020 will inevitably flow into consumption and assets in 2021.

Unconventional Economist


  1. Confiscation of savings by our unelected RBA overlords is hardly new or unintended. If debasing savings by debasing the currency by 2% annually as a targeted function is not enough, it is important that no interest should be earned to make sure there are no savings and people must borrow from banks to buy ever inflating assets. How else does one convert free and independent people into a nation of serfs?

    • kierans777MEMBER

      Hear, hear!! 👏

      I had this exact argument about central bank manipulation with the Chief Risk Officer of a bank. The CRO was lampooning the “cost of funds” (ie: interest paid on deposits). Everyone should go out and invest! Don’t leave your money in the bank! Go buy shares, or property (the holy grail). They did not like me pointing out the ethical questions about central brank manipulation. Driving people like cattle into assets to prop up prices even though the fundamentals might not support the prices. For someone in that role they didn’t understand risk very well IMHO.

  2. You can still be a saver. Just put the money into BitCoin. Seems to be working for me so far… Oh look an Iceberg ahead. No problems!


      If this monetary and fiscal madness continues btc could keep just going and going. Much as I hate to see it.

  3. You all think I’m extreme when I say these banks won’t survive the upcoming crisis
    Just sit back and look at the state our financial system is in
    It’s on its last legs .

    What do you all think it’s viable to have banks paying zero % to customers
    This is partly why Bitcoin is going up
    I said last year the banks would collapse, they did last April, into the arms of the RBA, even phil lowe said that RBA has provided more financial support to the banks now compared to GFC
    They are trapped, banks can’t.raise rates without endangering themselves but they will have no choice

    So they either die a slow death with continuous government support or they fall like the twin towers did in 9/11

    And all you smart people on here really believe all these first home buyers will be able to repay the billions they are borrowing now even if rates did stay 2%, no chance, the only reason prices are rising is people borrowing as much as the bank allow with very little chance of repayment

    The current state of our banks is much much worse than GFC

    A strong wind will blow them over, you wait to the financial crisis in the 2nd half this year, some will just close the door like Lehman did

    And you all say I was wrong, no just early not understanding foreseeing the extent they’d go to to stop everything collapsing

    My conviction, is now stronger than ever, and I don’t want it to happen, my retired parents having savings receiving zero %.

    I’m telling you many of them won’t be standing this time next year

    You’ll see early warning signs and the smart analysts will start writing about writing about the risks, I’d say after mid year or after. I don’t think anyone is there yet.

    Go get your kids some piggy banks they’ll be collectors items one day

    There will be some sort of nationalised merger or some other concoction they come up with

    It’s coming……. and it’s the next 12 months

    • I don’t believe in an interventionist central bank
      But I know, darling, that you do
      But if I did, I would kneel down and ask them
      Not to intervene when it came to you
      Oh, not to touch a cent in your account
      Leave you as you are
      If he felt he had to redirect your savings
      Then direct them into property

      Into property, oh Lowe
      Into property, oh Lowe
      Into property, oh Lowe
      Into property

    • What do you all think it’s viable to have banks paying zero % to customers

      Cos money can just be printed by the RBA and given to the banks via TFF

      MMT is here: Mugabe Monetary Theory

    • TailorTrashMEMBER

      In your prophecies of the great meltdown …what do you see happening to super funds …will they also be sucked down the great plug hole too ?

  4. The government RBA wants everyone to spend their money they have in the bank … where is the money coming from to fund all these home loans ?

    • pfh007.comMEMBER

      From credit creation by the private banks.

      That is where most (but not all) of the stuff in bank accounts comes from.

      • Not this time – most of this windfall was created by the govt dropping public money into private bank accounts.

  5. For anyone who wants a return on their cash savings of approx 20% per year without any downside risk or upside potential do the following.

    Purchase Bitcoin at Spot on a exchange (54-55k), then ASAP sell bitcoin September futures contracts for (60-61k). It’s that easy, do remember though that there is counter-party risk, as your Bitcoin will have to sit on exchange where the futures contracts were sold as collateral.

    Hold till duration then repeat (if premiums are still worth it)

  6. Yesterday you implied all this money is being used to pay down debt. Both these articles can’t be right. For the record, this one is the correct conclusion – most of the savings are hoarded in transaction accounts which will be used for consumption (so long as confidence can be maintained).

    • Ronin8317MEMBER

      A lot of it will be in offset accounts, then both paying down debt and increase in saving will occur at the same time.

  7. Phil Low sent a message to scomo saying that if he wants rates to stay at rock-bottom levels, then wages must not rise.

    Because Ya can’t have misery. Ya can’t have suffering. Ya can’t have all the truly nasty things that Scomo and the coalition want us to have, if wages start to rise.


    • Im curious as to why wages would rise? By decree? Im not seeing it happpen via productivity. If I go into a retail store there is no stock, if I go to a food establishment in slightly off-peak hours there is no food, if I go to a supermarket the shelves are stripped. So why would I be paying these people more money per hour to make no sales?