With fears of the fiscal cliff underwhelming the market, at this stage, this week’s focus will be on tomorrow’s decision by the Reserve Bank of Australia (RBA), which is going to have a big bearing on our term deposit strategy within our self-managed super funds (SMSFs).
In our investment strategy committee meeting for Switzer Financial Planning, we agreed that rates will fall over 2013 with the cash rate bound to go from the current 3.25% to something with a two in it! I've heard respected commentators say “I wouldn’t be surprised if it fell to 2%” – but I would!
There would have to be some kind of Armageddon scenario overseas for rates to fall that low and I'm not factoring in such an event for next year. However, with a big chunk of the world on near 0% equivalent cash rates, ours at 3.25% is simply too high.