How to Deal with the Dark Side of Low Interest Rates

While interest rates might be viewed as a welcome blessing the reality is it’s much trickier than that. Australians who have previously made wise financial decisions – designing smart budgets to save money for retirement will now not be rewarded for the sacrifices they made in their early years.


Keep in mind the following information is General Advice and is obviously not personalised for your unique needs, objectives or financial situation. Please get in touch with your advisor before taking any action on the below points so they can advise on the appropriateness of this for you.

Following the reserve bank of Australia’s decision to slash the cash rate target to 0.10%, being the lowest in history, the dark side of low-interest rates means that retirees will be required to cut down on expenses in their twilight years.

If you’re in the position where following the safer road hasn’t paid off, you could be asking where do I go next? Given the economy’s dependence on foreign markets, low interest rates aren’t going away anytime soon, but that doesn’t mean you have to suffer in silence.

Here’s our advice on how to deal with the dark side of low-interest rates.

Bolstering your Super

While you’ve likely allocated a set amount of money per year to your superfund, the federal government is increasing the amount of money you’ll be able to put into your super account. From 1 July 2021 the annual concessional contributions cap will increase to $27,500 and the non-concessional cap will increase to $110,000, an increase of $2,500 and $10,000 respectively. If your account balance is below $500,000, you’ll also be able to carry forward unused amounts under the concessional cap for a total of 5 years.

In addition to this, Super Guarantee (SG) payments by your employer, which are included in your non-concessional cap, will increase from 9.5% to 10%, a new system will be introduced to improve transparency about how your savings are invested and greater broadcasting of the underperformance of poorly managed super funds means that investing more in your super in the interim can stretch your dollar further.

Taking Advantage of Lower Lending Rates

The repayment rate on fixed-rate mortgages has fallen to some of their lowest levels thanks to funding provided by the RBA and the Australian government. This means that there’s never been a better time than right now to consider whether borrowing for investment purposes is right for you, given the attractiveness of these rates. As opposed to waiting for your savings to dwindle in a low-interest-bearing cash account.

Building a Resilient Wealth Strategy  

If you are in the position to invest in a financial growth strategy, then consulting with a professional advice organisation like Morrows presents a great opportunity to construct an investment portfolio that matches your needs. Whether you are looking to engage in an aggressive, stable or conservative strategy, having a well-designed and well-managed portfolio aims to outperform the drawbacks that come with reduced interest rates.

Following the efforts of global economies to rebuild and support packages for businesses globally, there’s never been a better time to discuss where you can invest with a qualified financial advisor.


If you’ve got any questions about dealing with the dark side of low-interest rates, don’t hesitate to contact your Morrows advisor today.

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