Richard Dahl
Richard Dahl

Principal Financial Adviser and Chairman - FMD Investment Committee


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What do low interest rates mean for Australian investors?

What do low interest rates mean for Australian investors?While the Australian banking system came through the crisis relatively well and interest rates remain positive, the RBA’s latest cut sees us adopting a record-low 2% cash rate. Like central banks all over the world the Reserve Bank is cutting rates to stimulate growth through business investment and to further dampen the Australian dollar, with the aim of improving exports. Unfortunately Australian business investment remains weak and the delayed interest rate rises in the US are keeping the Australian dollar higher than hoped.

It’s clear that term deposits, while low risk, don’t even keep pace with inflation in these conditions, but where does that leave investors who need to generate an income stream from their investments in the short-term?

It’s important to carefully evaluate risk when looking elsewhere for returns. It may be harder to see risk in a low rate environment but it still exists. The combination of low interest rates and the search for investment returns has already driven record growth in capital city housing markets, and while property seems less volatile there is still a significant risk in buying an overpriced apartment.

Share prices have also risen as investors have been willing to take-on more risk in the search for yield, but while not overvalued in historic terms the Australian share market is no longer cheap. However one thing is certain: a carefully managed diversification strategy remains the best hedge against low interest returns and emerging investment risk across other asset classes.

We are confident that with a diversified investment strategy that includes Australian and International shares, non-residential property and alternative investments – like infrastructure and hedge funds – combined with lower-yielding cash and government bonds will produce appropriate income and keep pace with inflation in a time of headwinds facing local and international markets.”

The Australian situation is not unique, and as the table of global interest rates below shows, Australia still has higher rates than most major economies. 


Official Interest Rate





United States






Great Britain















Central banks summary of current interest rates, June 2015 

General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977.