Australia’s central bank chief says he has sympathy for those retirees whose hip-pockets are being hit by lower interest rates.
Reserve Bank Governor Philip Lowe revealed at an inquiry hearing in Canberra on Friday he gets many letters from retirees complaining that cuts to the cash rate – which the RBA is using to help drive the economy – are eating away at the modest amounts of money they make from the interest on their bank deposits.
Studies show older retirees have more interest-bearing assets than other Australians and this trend is expected to grow over time as the population ages.
However, most retirees make ends meet through pensions, super funds, dividends from shares and – increasingly for over 65s – part-time work, the economics committee heard.
“I acknowledge that lower interest rates hurt the finances of the many Australians who rely on interest payments and the board has paid close attention to this issue,” Dr Lowe said in his opening statement.
He went on to tell the committee he received many letters from retirees.
“It’s not uncommon for people to say to me they’ve worked hard all their lives, they’ve saved, they’re frugal, they don’t spend very much and they rely on interest income and they have to cut back their spending.
“So I understand it is a real issue for many people.
“Some of these letters go on to say there are other people in the community who have borrowed a lot of money and they feel like they are being bailed out.
“At the very kind of human or individual level I have a great deal of sympathy for the people who write to me … it is a very significant issue for many people.”
However, he said on balance the RBA’s responsibility was to the national interest.
“Lower interest rates do support the overall economy and if more people have jobs and income growth is stronger we’ll all benefit, even though the distribution of those benefits is not even.”