Rate cut would do little to help economy: WAMBY KERRIE SYDEE | FRIDAY, 29 JUL 2016 12:16PMWith inflation at a 17 year low markets are pricing in a rate cut at next week's RBA meeting, although, according to head of investment management Australia at Western Asset Management, Anthony Kirkham, a rate cut might not be the right answer. Related News |
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Exactly right Anthony. Demographics are the key. The baby boomers have always made a difference and are now the ones with the savings. When the baby boomers had to borrow to consume, lowering interest rates was clearly stimulatory. Now that the baby boomers have to draw on their savings or superannuation accounts to consume, lowering interest rates actually decreases their capacity and willingness to consume. Holding rates steady or, perhaps, increasing them modestly, may be more productive than further cuts.
Perhaps we need to consider those retired baby-boomers criticised for accumulating significant super balances and other savings, who are too wary to spend it because they don't want to erode their principle.
How about actually INCREASING interest rates so that these self-funded retirees can have a decent income without having to resort to claiming the age pension from the public purse?