In its latest interest rate decision on 14 April, the Reserve Bank of New Zealand's Monetary Policy Committee maintained its official cash rate at a historic low of 0.25 per cent, introduced earlier in 2020, and its medium-term outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence.
The greatest risk
Lurking just under the surface of the investment ocean is a risk waiting to devour retirees desperate for yield. It’s understandable: after all, a retirement portfolio is supposed to generate cash. But considering the current economic situation generating income is tough.
Falling out of fashion
One of the main reasons people invest in term deposits over other investment assets is for safety. But not many realise the risky fact that New Zealand does not currently have a deposit insurance scheme. A long-standing Reserve Bank’s policy is aimed at allowing a distressed bank to be kept open for business while placing the cost of a bank failure primarily on the bank's shareholders and creditors, rather than the taxpayer.
Money under the mattress
In its latest interest rate decision on 12th August, the Reserve Bank of New Zealand maintained its official cash rate at 0.25 per cent but also raised the possibility of going into negative territory as the country faces the severe economic impact caused by the pandemic.
