Coronavirus: Seniors welcome deeming rates rethink

Josh Frydenberg has acknowledged the impact rate cuts have had on depositors, saying the government is open to again changing the deeming rate.

Interest groups for senior Australian have welcomed the government’s announcement that it is considering further changes to deeming rates as it responds to a record drop in interest rates.

Josh Frydenberg on Tuesday acknowledged the impact rate cuts had on depositors, and said the government was open to again changing the deeming rate — used to estimate how much pensioners earn on their financial investments — less than a year after it changed them for the first time in four years in July 2019.

When the government made those changes, which dropped the lower level deeming rate from 1.75 per cent to 1 per cent and the upper level deeming rate from 3.25 per cent to 3 per cent, pensioner groups were worried that the drop was not enough.

The Treasurer’s announcement that the government was con­sidering another change comes after several interest cuts in the past year, with the official rate sitting at a record low 0.5 per cent.

“It’s also difficult, I have to say, for people who are depositors, and that is something that the government is also considering,” Mr Frydenberg said.

“We are now having another look at the deeming rate. The change we announced last year was about $600m in terms of its cost.

“But we do recognise that both depositors and borrowers are ­affected by changing interest rates.”

Ian Yates, chief executive of COTA, the peak body representing older Australians, welcomed the government’s consideration of further changes to deeming rates and said he expected it to act quickly. “Obviously the level of interest rate reductions we’ve seen in recent years causes a great deal of stress on older Australians. It means the government needs to make sure it’s not adding to that stress,” he said.

“We believe the government should review deeming rates every six months, when the pension is adjusted in March and September.

“If the government doesn’t adjust deeming rates, it is assuming that older Australians are earning more than they possibly can.”