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Real After Tax Term Deposit Returns for Australian Savers are Negative; Savers Punished. Debtors Rewarded. Tax and Inflation Work for Borrowers and Against Savers.
Topic Started: 6 Mar 2012, 11:00 AM (20,807 Views)
frankrider
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Considering the fact that the very few people have $200k to $400k on deposit, and the home loans banks create for those amounts cost them nothing in effect, and get repayed (plus interest) in a steady stream of income, I'd say they were well ahead of the game. At least until major defaults begin occuring and no more suckers line up to pay premium prices for the reposessed homes.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
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How to lock away your hard-earned

February 27, 2013
John Collett

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Only two years ago, financial institutions were bending over backwards to attract depositors' cash with interest rates on term deposits of more than 6 per cent. Now interest rates are lower, more legwork by savers is needed to find the best rates.

But for depositors wanting absolute security for their money, good deals are still on offer.

At the time of writing, the best online saver rate is ME Bank's Online Savings Account with 5.1 per cent. Researcher Canstar says Citibank's Online Saver and ING Direct's Savings Maximiser share second spot with 5 per cent. Of the big banks, the best online saver rate is 4.9 per cent from the Commonwealth Bank's NetSaver. Be aware that these interest rates include the ''bonus'' rate that is usually paid for a certain time after the account is opened, after which the interest falls to the lower ''base'' rate. The bonus rate can apply for as little as three months.

A financial analyst with researcher Canstar, Adam Beu, says providers know that many savers are likely to stick with the online saver account beyond the bonus rate period. While one of the biggest differences in online savers is the length of the bonus interest period, some have additional conditions that have to be met to earn bonus rates. For example, they could include maintaining a minimum balance or that a minimum amount must be deposited regularly into the account.

Savvy savers who are prepared to switch to a better-paying online saver before the end of the bonus period should be able to keep earning 5 per cent and have daily access to the money. And, as with term deposits, online savers are covered by the government's deposit guarantee, under which the first $250,000 is protected.

For savers wanting a fixed rate of interest, term deposits are paying, on average, about 4.5 per cent across maturity periods; a little less for terms of less than 12 months.

That is not as good as two years ago, when the rate was 6 per cent, or even a year ago when the typical interest rate was about 5.4 per cent. The best-paying one-year term deposit listed on Canstar's database is Ubank with a rate of 4.7 per cent, followed by ING Direct with 4.6 per cent and the Qantas Staff Credit Union with an ''effective'' rate of 4.59 per cent.

Read more: http://www.smh.com.au/money/saving/how-to-lock-away-your-hardearned-20130226-2f2t9.html
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nuff_ced
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Interestingly Ubank just upped their rate on savings a few days ago. Could be the bottom of interest rates? Or mainly because they cut one to many times more than the RBA and got a lot of negative feedback from their customers.

https://twitter.com/UBank/status/306170505847771136
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Count du Monet
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How to lock away your hard-earned


Lock away your hard earned in a currency that will sink as the decade progresses.

Past 20 years the AUD devaluation rate on average pa has been 5.1%. So you are losing and even worse paying tax on a supposed gain.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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Online accounts fudging 'high' interest rates

March 11, 2013
Clancy Yeates

Australians rushing to put their savings in heavily promoted ''high interest'' online savings accounts may not be getting the interest rate kick they are led to believe by the industry's glossy brochures, with after-tax returns from many online accounts failing to keep up with inflation, new figures show.

The average interest rate paid on online savers, once promotional offers are excluded, has slipped to 2.53 per cent, according to financial researchers at Canstar.

Although consumers can get significantly higher ''bonus'' rates if they make regular contributions or do not make withdrawals, the figures highlight the low ''base rates'' paid on online saving accounts where people are not benefiting from promotional or bonus offers.

When income taxes and the Medicare levy are taken into account, the analysis found the average online savings rate was paying a return of less than 2 per cent. This compares with the latest inflation rate of 2.2 per cent.

''Any investors who pay tax are going backwards on their cash investments, unless they're earning an above-average return,'' Canstar's head of product and strategy, Steve Mickenbecker, said.

While banks heavily promote their bonus or promotional rates, the analysis is based on the rates charged once so-called ''honeymoon'' rates have lapsed.

Each big-four bank has a 3 per cent base rate for online accounts, above the industry average. But for those with a taxable annual income more than $37,000, this is still not likely to be enough to keep up with inflation, the analysis found.

Read more: http://www.smh.com.au/business/online-accounts-fudging-high-interest-rates-20130310-2fu3v.html
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Penny drops: savings are a dud

May 8, 2013 - 10:56AM
Michael Pascoe

So you’re a self-funded retiree cursing the Reserve Bank for cutting interest rates. Don’t. If the RBA has forced you to realise your term deposits are duds, the mandarins have done you a favour.

Savers dependent on fixed interest have been poorly advised for decades, not just over the past year as interest rates have tumbled. The dividend flow from a boring portfolio of industrial stocks trounces fixed interest and whatever the best daily rate might be from the on-line banks.

And right now, even after the market has rallied to start the year, equity yields slaughter the best term deposit rates you could have grabbed last year. Of course the yields aren’t as tasty as they were in January or as extremely tasty as they were a year or two ago, but they’re still fine in the general scheme of things.

Read more: http://www.smh.com.au/business/markets/penny-drops-savings-are-a-dud-20130508-2j6p1.html
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Failure to move money costs savers $2.5b a year

January 17, 2014
John Collett

Savers are missing out on an estimated $2.5 billion a year in interest by leaving their cash in everyday transaction accounts.

Online saver accounts generally pay much higher interest rates than transaction accounts.

The group executive manager of RaboDirect, Greg McAweeney, says many savers are missing out on interest by leaving their money in everyday transaction accounts.

While almost everyone has such an account, about 40 per cent also have an online savings account. But he says those with online savers can still leave money languishing in a transaction account.

Most people have their pay put into a transaction account, and most intend to sweep what is left over in the transactions account into their savings account, but never do, McAweeney says.

Data from researcher Canstar shows many everyday accounts do not pay interest. Some of the accounts that pay no interest charge $5 or $6 in monthly account-keeping fees.

Most online savers pay about 4 per cent – some more. The interest includes a “bonus” interest rate.

Once the bonus period ends on an online saver, the interest rate reverts to the base rate, which is typically about 3 per cent. Bonus rate periods are typically three or four months.

Adam Beau, a research analyst with Canstar, says savers could switch to another online saver before the end of the bonus period so as to keep earning 4 per cent with daily access to the money.

For savers wanting a fixed rate of interest, Canstar data shows the best-paying, one-year term deposits pay about 4 per cent on a deposit of $1000.

Read more: http://www.smh.com.au/money/saving/failure-to-move-money-costs-savers-25b-a-year-20140117-30yhv.html
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mel
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Who here believes savers should be rewarded anything higher than CPI? In an ideal world people would put their savings to work in a productive manner.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
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David McAllistair
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mel
18 Jan 2014, 09:10 PM
Who here believes savers should be rewarded anything higher than CPI? In an ideal world people would put their savings to work in a productive manner.
Savers should be rewarded in proportion to what the market is prepared to pay for capital. Unfortunately, the cost of money is set by the central bank, against the wishes of those who wish to save, and to tempt those who have no productive use for capital to borrow.
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peter fraser
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David McAllistair
18 Jan 2014, 09:25 PM
Savers should be rewarded in proportion to what the market is prepared to pay for capital. Unfortunately, the cost of money is set by the central bank, against the wishes of those who wish to save, and to tempt those who have no productive use for capital to borrow.
When the demand for money falls so does the interest rate.
Any expressed market opinion is my own and is not to be taken as financial advice
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