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Thursday, 02 May 2013 12:49

Term Deposits - the Great Rotation

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There has been much discussion that the rally in the Australian share market has been as a result of a switch from investors with Term Deposits seeking a higher rate of income.  The chart below would seem to dispell that notion as it shows continued growth of term deposits in Australia to record levels.

Speculation continues of further interest rate cuts in Australia which would reduce term deposit rates even further.  Bill Evans (Westpac Chief Economist) is of the view that interest rates will be cut to 2% by 2014.

Term Deposit Growth chart

So it seems that there has not been a rotation out of term deposits into shares just yet.

This is further evidenced by the next chart which shows equity ownership by Australian households at 20 year lows.

Equity holdings at 20 year lows

Share prices have risen dramatically from low levels, but it would seem not as a result of a mass movement of funds from term deposits.

One can only imagine what may happen if the rotation from term deposits back into shares actually takes place.


This material has been provided for general information purposes and must not be construed as investment advice. This material has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Investors should consider obtaining professional investment advice tailored to their specific circumstances prior to making any investment decisions and should read the relevant Product Disclosure Statement.






Read 1964 times Last modified on Wednesday, 08 May 2013 20:47
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