25 Jul 2016

Savers doing it tough - analyst

1:31 pm on 25 July 2016

Savers are doing it tough in the low interest rate environment and should prepare for further easing, says an analyst.

Last week, the Reserve Bank's surprise economic update highlighted weak inflation as a reason to cut the Official Cash Rate.

09062016 Photo: RNZ/Rebekah Parsons-King. Governor of the Reserve Bank of New Zealand, Graeme Wheeler delievers lastest OCR annoucement.

Graeme Wheeler Photo: RNZ/Rebekah Parsons-King

"At this stage it seems likely that further policy easing will be required to ensure that future average inflation settles near the middle of the target range," Reserve Bank Governor Graeme Wheeler said.

The OCR already sits at historic lows and could fall as soon as next month.

As the OCR has moved down so too have term deposit rates with the retail banks.

Head of private wealth research at Craigs Investment Partners Mark Lister said it was a hard time to save.

He said retirees would be feeling the pinch, along with others who rely on the interest from term deposits to live and pay bills.

"When you think about those term deposit rates at 3 percent... you still have to pay tax on that income so after that, you are only left with about 2.5 percent, which is barely covering the cost of living, increases for rates and insurance and that sort of thing," he said.

Mr Lister said savers would need to take on more risk by going to other investments, such as the sharemarket, if they wanted better returns.