Australians Put Record Amounts Into Term Deposits During 2008

Post by Sharat on January 6, 2009 · Under banking, interest rates, investments ·

Reserve Bank of Australia data shows that bank term deposits have increased by more than 50 per cent in 2008 which is the fastest growth in term deposits in nearly 20 years.

Official cash interest rates currently stand at 4.25 per cent and may fall by a further half percentage point to 3.75 per cent in February. Should interest rates fall as analysts expect, they will be at their lowest level since 1967.

The Australian central bank’s data shows that despite the repeated cut in interest rates that occurred in the final quarter of last year in response to the credit crisis, the amount invested in term deposits increased by more than A$ 9.4 billion in November alone to a total of A$ 326.4 billion.

The total amount held in term deposits represents half the value of all savings placed in the superannuation system, which have had a negative year in the aftermath of a near halving in valuations of global equity markets. The median return in a balanced super fund is running just shy of minus 20 per cent for the year to November according to research house SuperRatings.

2008 was the worst year on record for the Australian equity market with the S&P/ASX 200 down 41.3 per cent and the broader All Ordinaries down 43 per cent. Most analysts are sanguine about equity market returns in 2009 however, noting that in previous years where the equity market collapsed, namely in 1931 and 1974, years in which the stock market fell by over 30 percent, Australian shares rebounded with double digit gains in the following years.

From 2003-07 the Australian share market recorded its longest period of double-digit gains. In 2008, total returns on the All Ordinaries index fell by 40.5 per cent after rising by 163.8 per cent over the previous five years.

Compare Australian Term Deposits

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