While welcomed by debt-heavy families, the latest interest rate cut has been another financial blow to many grey nomads.
The Reserve Bank’s recent 0.25% cut means less income for self-funded retirees who have planned carefully for their post-work adventures.
The statistics are startling. In August 2008, the official cash rate was 7.25%. Five years later it sits at an all-time low of 2.5%. According to Vern Gowdie, the Editor of Gowdie Family Wealth, anyone living off the interest from their savings has suffered a 65% income cut.
“Over the same period that retiree income has fallen, the cost of living has gone up … rates, electricity, fuel, food, health insurance etc,” he said. “Finding the fat in an already lean budget is no mean feat.”
Mr Gowdie says retirees are being caught in ‘a vice of falling income and rising costs’.
While no one can predict the future with any certainty, there are certainly those who believe interest rates will continue to fall as global economic conditions weaken … and that means further pain for many grey nomads.
“The RBA standard (and, only) response to worsening conditions is to turn the interest rate dial down,” said Mr Gowdie. “You can expect rates to fall into the 1% zone, like Europe, the USA and Japan.”
How have falling interest rates affected your travels? Are you prepared for further interest rate cuts? Comment below
We are now reducing our normal annual extended trip to bi-annual and if the rates continue to drop and cost of living continues to increase, the years of planning and saving we did whilst working may come to very little as we will have to dramatically reduce our spending by staying at home and if many of us are forced to do this the effects on country towns and tourism could be dramatic, but unfortunately I dont have a solution.