John Cameron's personal blog

We have the lowest interest rates in our history, and the Reserve Bank warns that we are in for a prolonged period of low rates.

But just how low can they go?

Well, there are trillions of dollars world-wide that is currently subject to NEGATIVE rates. That’s right, NEGATIVE interest rates.

1. Changing Times

For several years, we have been in an environment of ever falling interest rates, as Governments have relied on monetary policy to fix the damage wreaked by the GFC.

However, while this has arguably prevented some really horrible things from happening (such as a world-wide depression), it has not succeeded in making good things happen. Now many are looking to more Government spending to boost economic growth. In this context president-elect Donald Trump spoke on election night of modernising America’s often old and creaking infrastructure and making it the world’s best. Depending on the scale, this would indeed be a game changer. If successful, it could also draw other countries down this path, as well as lead to rising (instead of falling) interest rates.

(Will Governments start spending more to boost growth?)

Over the last few months there has been a notable shift in the narrative around economic policy.

Since the GFC, the main tool of policymakers has been monetary policy (think record low interest rates). 

Security is something keenly sought by investors, and is particularly important to people at or near retirement.

However, our whole approach to security is being challenged by the current climate of low interest rates, where there are trillions of dollars invested in bonds world-wide, that are earning negative returns.

Closer to home, term deposits attract around 3%pa, while a diversified portfolio of shares can show around 6% to 8% after allowing for tax credits. Investments can be made directly, or via managed funds deliberately managed to harvest a stream of dividends.