Savers need to take action NOW. Online savings account rates offered by the big four banks are now all set at 0.5 per cent p.a. The current Australian inflation rate is 1.3 per cent p.a. meaning that savers with their cash in a big four online savings account are losing money and are paying an effective interest rate of 0.8 per cent to put their money in the bank. But there are still plenty of banks and other institutions offering savings account rate well above the inflation rate. ING’s Savings Maximiser has a total bonus rate of 2.80 per cent. AMP Bank’s Saver Account is paying 2.75 per cent. Move Bank (formerly Railways Credit Union) has a public offer Express Saver S50 Account currently paying a variable rate of 2.20 per cent. Compare savings accounts from Australia’s major banks, credit unions and building societies here. Big Four banks cut term deposit rates. All four of the big Australian banks have cut term deposit rates by up to 0.9 percentage points. Many other banks and credit unions have also cut term deposit rates in recent months. The highest 6-month term deposit rate now generally available in Australia is 2.70 per cent p.a. from Citi. The best 12-month term deposit rate in the Australian market is now 2.70 per cent p.a. from a few credit unions. The best 2-year term deposit rate generally available is 2.80 per cent p.a. from BCU. Compare term deposit rates, fees and features from Australia’s major banks, credit unions and other financial institutions here. How low can interest rates go? The Reserve Bank of Australia (RBA) cut its official interest rate by 0.25 percentage points to 1.25 per cent and another drop is expected as soon as next month. Associate Professor in Finance at Deakin Business School Victor Fang believes the next cut in rates will see interest rates drop to 1 per cent. “A further drop in interest rates will boost household disposable incomes and lower the A$ exchange value to increase exports, which in turn helps the economy,” Professor Fang says. But the RBA may be hesitant to cut rates repreatedly. “If the interest margin gets too much closer to zero, there will be less incentive for banks to lend money because there’s less profit to be made and depositors will have no interest return on their savings,” he said. New lender targets small business’ urgent need for finance. A Swiss alternative lender has announced its expansion into the Australian small business finance and loan market. Tradeplus24 will offer lines of credit between $500,000 and $10m and does not require property as collateral. Tradeplus24 Australia’s chief executive Adam Lane said there is an urgent need for innovative business credit solutions in Australia. “In our solution, the business owner keeps control of the cashflow,” Adam Lane told Broker News, “We don’t get involved unless there’s an imbalance.” Tradeplus24 is backed by Credit Suisse. Are low interest rates good or bad for Australia? The Reserve Bank of Australia (RBA) cut its official interest rate by 0.25 percentage points to 1.25 per cent and another drop is expected as soon as next month. Associate Professor in Finance at Deakin Business School Victor Fang said low interest rates are “not a good thing, there has to be a balance.” Low interest rates mean less profit for banks from loans and less incentive to lend, while savers also get very low returns he said. Tony Morrison, CEO of Harcourts Victoria and Tasmania says a drop in rates will have an overall positive effect on the real estate industry. “I believe the interest rate drop will stimulate the real estate industry, which is a good thing,” Morrison says.