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Savers in the red as interest rates fail to keep up with inflation


Contributed by comparison site Mozo.

With inflation going up and banks slashing deposit rates, financial comparison site says there are now no savings accounts with an interest rate high enough to keep savers ahead of tax and inflation.

Mozo says interest rates have been slashed on 35 savings accounts since the beginning of the year while at the same time, inflation has risen from 1.50% to 2.10%.

To beat inflation and tax, Mozo calculates that average-income savers would need to be earning an interest rate of at least 3.11%. Alarmingly the highest savings account rate on the market is now just 3.05%.

“The picture for savers is becoming more and more bleak, with the nation’s savings being eaten away by tumbling interest rates and rising inflation,” says Mozo Director Kirsty Lamont.

“Savers could be forgiven for thinking they might as well just stuff their cash under their mattress, but the better strategy is to move your money into a top paying savings account or term deposit so that your savings are in the best position to ride out the current trough and recover.”

“For those who can afford to stash their cash away for two or more years, there’s a handful of term deposit accounts with inflation-beating rates, with the best rate currently 3.40% on a 3 year term.”Term deposits with a rate above 3.1%

Term deposits with a rate above 3.1%

*3.11% is the interest rate needed to stay ahead of inflation and tax.

Source: at 8 June 2017.

Mozo’s data shows that the average ongoing savings account interest rate has plummeted to 1.83% from 2.04% over the past year.
“Since the beginning of 2017 we’ve seen base interest rates cut on seven savings accounts 0.14% on average, while ongoing bonus interest rates have been hacked on 17 accounts by 0.12%. As a result, savers would be losing money after inflation and tax eat away at their balance,” says Lamont.

“Term deposit account interest rates have been more volatile this year, and while rates have been cut by an average 0.20% on 287 different terms so far this year, 112 terms have seen rate rises averaging 0.24%. This means savers can still find good deals if they’re prepared to part with their money for a few years.”

Top 5 savings accounts by ongoing bonus interest rate

Source: at 8 June 2017. The interest rate needed to to stay ahead of inflation and tax is 3.11%.

Notes on calculations: Inflation for the year to the end of March 2017 was 2.10%. (Source: RBA). The marginal income tax rate for people earning a salary of $75,000 is 32.50%. To earn net interest after tax of more than 2.10% an account needs to pay at least 3.11%.



Mozo compares 1,800 products from 200 banking, insurance and energy providers to help over 300,000 Australians find a better deal each month via its award winning comparison tools and calculators. Mozo is proud to partner with some of the country’s biggest online publishers, making it one of the most visited comparison sites in Australia.

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