Term deposit rates set to drop

Co-founder of the Switzer Report
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Now is the time to lock in the interest rates on your term deposits, with the days of 'big figure' rates of 6% to 7% fast coming to an end. Headline rates are likely to slide to about 5%, or even 4%, possibly as early as next month.

There are three factors driving term deposit rates lower. Firstly, interest rates are falling. There has been a material move down in government bond market rates over the last few weeks, with the benchmark three-year government bond falling to 4.33%.

As chief economist Bill Evans from Westpac highlighted at the weekend, some leading economists now believe the Reserve Bank of Australia’s next rates move will be down rather than up. At Switzer, we have been in this camp for some months – the Australian (non resources) economy is struggling, the Australian dollar is too high, the property market is in the doldrums, and credit growth is anaemic. Notwithstanding the 'jawboning' of the markets by RBA governor Glenn Stevens, interest rates are not going up this year.

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