Kochie’s Market Update: Economic Stimulus Package 2.0

market-update-March-27

Economic Stimulus Package 2.0

You’ve read about this, and I’ve talked about it, all week, but quick recap of last Sunday’s announcements.

– Small business will receive a 50 per cent rebate of their March and June quarter BAS or IAS from a minimum total (across both quarter) of $20,000 to a maximum $100,000.

– Small business bank loans of up $250,000, coming with a 50 per cent Government guarantee, with no repayments for the first 6 months. Have to be approved by the banks.

– All welfare recipients to receive a $750 cash payment in March and July.

– Access to superannuation in cases of financial hardship of $10,000 tax free now and another $10,000 after July 1.

– Soles traders, contractors and causal have access to the Job Seeker welfare payments of up to $1100 a fortnight.

There will be more stimulus packages to come which I think will target average taxpayers along with safeguards for home loan borrowers and renters.

Surprisingly the average Australian was in pretty good financial shape… before this Black Swan

It is cold comfort for many but the household wealth of the average Australian has never been better… that is before this Coronavirus pandemic hit us. 

Since then sharemarkets and superannuation fund performance have crumbled of course.

Total household wealth increased 3.3 per cent in the December quarter of 2019 to a record high of $11,309 billion.

– Average household wealth increased by $12,809 to a record $442,705 per person in the December quarter. Household wealth grew 10.2 per cent over the year, with household wealth per person increasing 8.6 per cent.

– Households held a record $1,175.9 billion in cash and deposits at the end of December and a record $1,088.8 billion in shares.

Believe it or not… term deposit rates have gone up

Last week’s official interest rate cut wasn’t passed on to variable home loan borrowers but it was on fixed rate and small business loans… and term deposit rates going up.

Good news for self funded retirees and savers.

 The move was led by Australia’s biggest bank, CBA who announced they would hike their 12-month term deposit rate to 1.70 per cent. Banks following suit include Westpac, NAB, St George, Suncorp, Bank of Melbourne, Bank of Queensland, HSBC and Macquarie Bank.

But RateCity.com.au analysis shows that just 2 per cent of term deposit rates on their database offer interest returns that are equal to, or above, current inflation at 1.8 per cent.

The highest rate is 2.15 per cent from Judo Bank for 5 years.

Some of the highest term deposit rates on RateCity.com.au

BankRateTerm
Judo Bank2.15%5 years
Westpac2.00%8 months (for ages 65+)
First Mac1.95%6 months
Arab Bank1.90%6 months
Bank of Us1.85%7 months

Note: Rates are effective as of 25.03.2020 with the exception of Westpac. Terms under 6 months not included. Where the bank has multiple rates, the highest is listed. Judo offers rates over 2% for terms of 2-5 years. Some rates are dependent on balance.

The highest term deposit rates offered by the big four banks:

BankTerm (months)Rates
CBA121.70%
Westpac121.70%*
NAB101.75%
ANZ81.35%

 

Source: RateCity.com.au. *Westpac rates effective 27 March. Customers 65+ can access an 8-mth term deposit of 2.00%.

A couple of things to remember about term deposits:

– The government guarantees up to $250,000 per person if the money is deposited with a bank, building society, credit union or financial institution that is an accredited authorised deposit-taking institution (ADI).

– It is for a fixed “term”. If you pull money out early, you can potentially be charged a fee, miss out on interest or have to wait up to a month to receive your money. But, many banks are waiving some penalties related to breaking a term deposit if you have been affected by the COVID-19 crisis. Contact your bank to discuss your options. 

Some of the highest term deposit rates on RateCity.com.au 

1-year term depositRate
Judo Bank2.05%
Firstmac1.90%
AMP Bank (min $25k)1.80%

Source: RateCity.com.au

2-year tern depositRate
Judo Bank2.00%
QBANK (min $250K)1.70%
Firstmac1.65%

Source: RateCity.com.au 

3-year term depositRate
Judo Bank2.05%
Australian Military Bank (min $50K)1.65%
QBANK (min $250K)1.65%

Source: RateCity.com.au

Fixed rate home loan bargains

As I said earlier, while banks haven’t passed on rate cuts to variable home loans, they have for fixed rate fixed term loans. And they are looking very attractive.

1-year fixed: lowest rates on RateCity.com.au

LenderAdvertised 1 year fixed rate
Reduce Home Loans2.19%
BankVic2.19%
G&C Mutual2.19%

 

2-year fixed: lowest rates on RateCity.com.au

LenderAdvertised 2 year fixed rate
ING2.09%
Reduce Home Loans2.19%
NAB2.19%

 

3-year fixed: lowest rates on RateCity.com.au

LenderAdvertised 3 year fixed rate
ING2.14%
Reduce Home Loans2.19%
Tic Toc2.22%

 

5-year fixed: lowest rates on RateCity.com.au

LenderAdvertised 5 year fixed rate
ING2.54%
Suncorp2.69%
BankVic2.70%

 

Note: For owner occupiers paying principal and interest. Some changes still to come into effect. Revert and comparison rates are higher.

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