Falling official interest rates in Australia will dampen individual investors’ appetite for cash term deposits and increase appetite for dividend-paying stocks, listed property and other yielding assets, according to AMP Capital Investors.
The Sydney-based fund manager, which oversees about $100 billion in assets, official interest rates to fall from 3.5 per cent to 3 per cent or lower in the next six months as the Reserve Bank of Australia responds to below-average business and consumer confidence, slowing economic growth and benign inflation, Shane Oliver, head of investment strategy and chief economist, said.
Three-year term deposit rose to 7 per cent in 2010 and 2011 as they were driven by higher official interest rates and the so-called war for deposits among banks seeking to diversify from wholesale sources of funding. Average term-deposit rates are likely to fall to about 4 per cent, Oliver said in a research note published on July 24.
Individual investors may buy other yielding assets – such as stocks providing “decent and sustainable” dividends, real estate investment trusts, unlisted non-residential property and corporate debt – as they seek reliable income amid volatile markets, Oliver said.