Reducing the supply of capital and a greater reliance on overseas markets will ultimately push interest rates up. While it might be argued that income from bank deposits can equally be used as retirement savings, unlike superannuation, there are no restrictions on when bank deposits can be accessed. Rather than being used for long-term savings, it is probable that these funds will be used for short-term consumption. Shifting income from longterm saving in superannuation to consumption will push up prices, and ultimately interest rates. The tax treatment of interest on savings deposits also needs to be considered in the context of the treatment of other similar cash-like savings products. Giving tax preferential treatment to interest in savings accounts will distort the market for cash-like savings products. The impact of preferential treatment of bank deposits can be seen through the negative impact of the bank-deposit guarantee on other non-bank cash-like products. Depending on the concessionality provided to deposits, this distortion could be even more significant.

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