Placeholder Content Image

Major bank announces huge home loan rate cut

<p>The Commonwealth Bank of Australia (CBA) will reduce its fixed-rate home loans by up to 0.40 percentage points across all terms starting Friday, following a 0.25 percentage point cut to its variable rate in response to the Reserve Bank of Australia’s (RBA) recent cash rate reduction.</p> <p>The new rates will see CBA’s lowest fixed offering set at 5.49% for a three-year term. Despite the move, experts say the cuts are unlikely to spark a surge in homeowners locking in their mortgages.</p> <p>Sally Tindall, data insights director at Canstar.com.au, said the rate adjustments bring CBA closer to its major bank competitors but aren’t enough to significantly shift consumer behaviour.</p> <p>“CBA’s fixed rate cuts aren’t groundbreaking, but rather a bid to inch closer to its key competitors,” Tindall said. “Fixed rates have been falling fairly consistently this year, and we expect this activity will continue as banks price in the increasing likelihood of further cash rate cuts.”</p> <p>While CBA’s new rates mark progress, rivals remain more competitive. ANZ holds the lowest one- and two-year fixed rates among the big four banks, while National Australia Bank (NAB) continues to offer the most attractive three-, four-, and five-year fixed terms.</p> <p>Tindall also noted that with only a slim margin – just 0.10 percentage points – between current fixed and variable rates, many borrowers will likely hold off from locking in.</p> <p>“With the possibility of further RBA cuts ramping up, it’s hard to see many people jumping at the chance to lock up their mortgage for the next three years,” she said. “The majors might have to offer a fixed rate in the ‘4’s’ if they’re serious about getting people to lock in.”</p> <p>Canstar’s latest data shows a flurry of activity across the lending sector since the RBA’s decision. Twenty lenders have reduced at least one fixed rate this month, and five major lenders, excluding CBA, have already made cuts.</p> <p>Among them, BOQ, Community First Bank, Police Bank and Queensland Country Bank now offer at least one fixed rate below 5%, setting the benchmark at 4.99%.</p> <p>Tindall urged borrowers to carefully consider their financial situation and risk appetite when deciding between fixed and variable rates. “If you’re deciding between a fixed or variable rate, understand what might suit your finances and, to some extent, your personality. When you make a decision, take the time to look for a competitive rate,” she said.</p> <p>While the trend suggests fixed rates will continue to fall, CBA's latest move clearly shows the intense competition in the home loan market – one that still leaves many Australians hesitant to commit.</p> <p><em>Image: Supplied</em></p>

Money & Banking

Placeholder Content Image

RBA cuts interest rate - so what happens now?

<div class="theconversation-article-body"> <p>The Reserve Bank of Australia <a href="https://www.rba.gov.au/media-releases/2025/mr-25-13.html">cut the official interest rate</a> for the second time this year, as it lowered forecasts for Australian economic growth and pointed to increasing uncertainty in the world economy.</p> <p>The bank lowered the <a href="https://www.rba.gov.au/cash-rate-target-overview.html">cash rate target</a> by 0.25%, from 4.1% to 3.85%, saying inflation is expected to remain in the target band.</p> <p>All the big four banks swiftly passed the cut on to households with mortgages. This will save a household with a $500,000 loan about $80 a month.</p> <p>Announcing the cut, the Reserve Bank <a href="https://www.rba.gov.au/media-releases/2025/mr-25-13.html">stressed</a> in its accompanying statement it stands ready to reduce rates again if the economic outlook deteriorates sharply.</p> <blockquote> <p>The Board considered a severe downside scenario and noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.</p> </blockquote> <h2>Inflation is back under control</h2> <p>The latest <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">Consumer Price Index</a> showed that inflation remained around the middle of the Reserve Bank’s <a href="https://www.rba.gov.au/education/resources/explainers/australias-inflation-target.html">medium-term target band of 2-3%</a> in the March quarter.</p> <p>The Reserve Bank was also comforted by the underlying inflation measure called the “trimmed mean”. This measure excludes items with the largest price movements up or down.</p> <p>The bank noted that it has returned to the 2–3% target band for the first time since 2021. This suggests inflation is not just temporarily low due to temporary factors such as the electricity price rebates.</p> <p><iframe id="QQ6io" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/QQ6io/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <p>In February, Reserve Bank Governor Michele Bullock <a href="https://parlinfo.aph.gov.au/parlInfo/download/committees/commrep/28670/toc_pdf/Economics%20Committee_2025_02_21_Official.pdf;fileType=application%2Fpdf">conceded</a> the bank had arguably been “late raising interest rates on the way up”. It did not want to be late on the way down.</p> <p>Perhaps Bullock is being unduly modest. The central bank looks to have judged well the extent of monetary tightening. It did not raise interest rates as much as its peers, but still got inflation back to the target.</p> <p><iframe id="ZIcUE" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/ZIcUE/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <h2>Unemployment remains low</h2> <p>Last week, we got an <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release">update</a> on the strength of the labour market. Unemployment stayed at 4.1%. It has now been around 4% since late 2023, a remarkable achievement.</p> <p>This is below the 4.5% the Reserve Bank had <a href="https://www.rba.gov.au/speeches/2019/sp-ag-2019-06-12-2.html">regarded</a> as the level consistent with steady inflation (in economic jargon, the <a href="https://www.rba.gov.au/education/resources/explainers/nairu.html">NAIRU</a>). But neither prices nor <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">wages</a> have accelerated.</p> <p><iframe id="WYjUU" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/WYjUU/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <h2>Households and businesses may turn cautious</h2> <p>In its updated <a href="https://www.rba.gov.au/publications/smp/2025/may/pdf/statement-on-monetary-policy-2025-05.pdf">forecasts</a>, the bank sees headline inflation dropping to 2.1% by mid-year but going back to 3.0% by the end of the year, as the electricity subsidies are removed. By mid-2027, it will be back near the middle of the 2-3% target.</p> <p>Underlying inflation is forecast to stay around the middle of the target band throughout.</p> <p>The Reserve Bank cut its forecast for gross domestic product (GDP) to 2.1% by December, down from its previous forecast of 2.4% made in February. It said:</p> <blockquote> <p>Economic policy uncertainty has increased sharply alongside recent global developments, and this is expected to prompt some households to increase their precautionary savings and some businesses to postpone some investment decisions.</p> </blockquote> <p>The unemployment rate is expected to increase to 4.3% by the end of the year and remain there through 2026.</p> <p>Cost of living pressures look set to ease, as real household disposable income grows faster than population.</p> <p>As the Reserve Bank governor told a media conference on Tuesday:</p> <blockquote> <p>There’s now a new set of challenges facing the economy, but with inflation declining and the unemployment rate relatively low, we’re well positioned to deal with them. The board remains prepared to take further action if that is required.</p> </blockquote> <h2>Economic and policy ‘unpredictability’</h2> <p>The main uncertainty in the global economy is how the trade war instigated by US President Donald Trump will play out. <a href="https://www.washingtonpost.com/business/2025/05/14/trump-tariffs-china-trade/">According to one count</a>, he has announced new or revised tariff policies about 50 times.</p> <p>“The outlook for the global economy has deteriorated since the February statement. This is due to the adverse impact on global growth from higher tariffs and widespread economic and policy unpredictability,” the bank noted.</p> <p>The US tariff pauses on the highest rates on China and most other nations are due to be in place for 90 days. But more measures may be announced before then.</p> <p>This uncertainty is likely to be stifling trade, and even more so investment decisions by companies in the face of rapidly changing policies. And it will weaken the global economy.</p> <p>In her <a href="https://rba.livecrowdevents.tv/MediaConferenceMonetaryPolicyDecision20May2025/stream">press conference</a>, Bullock said the board’s judgement was that “global trade developments will overall be disinflationary for Australia”. Not only is the global outlook weaker, but some goods no longer being sold to the US could be diverted to Australia.</p> <h2>Where will interest rates go from here?</h2> <p>The Reserve Bank’s updated <a href="https://www.rba.gov.au/publications/smp/2025/may/pdf/statement-on-monetary-policy-2025-05.pdf">forecasts</a> assume interest rates will fall further, to 3.4% by the end of the year.</p> <p>But this is just a reflection of what <a href="https://www.rba.gov.au/statistics/cash-rate/assumptions/index.html">financial markets are implying</a>. It is not necessarily what the bank itself <em>expects</em> to do. It is certainty not a <em>promise</em> of what they will do.</p> <p>But the Reserve Bank still regards its stance as “restrictive”, or weighing on growth. So if it continues to believe inflation will stay within the target band, or the global outlook deteriorates, it will cut rates further.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/256798/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em>By <a href="https://theconversation.com/profiles/john-hawkins-746285">John Hawkins</a>, Senior Lecturer, Canberra School of Politics, Economics and Society, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a></em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/rba-cuts-interest-rates-ready-to-respond-again-if-the-economy-weakens-further-256798">original article</a>. </em></p> <p><em>Image: Sky News</em></p> </div>

Money & Banking

Placeholder Content Image

Aussie TV star wins $9.2m on game show – the largest in history

<p>In an electrifying moment that will surely go down in television history, Australian reality TV star David Genat has claimed a jaw-dropping AUD$9.2 million prize on US television, securing the largest single cash payout ever seen on American TV.</p> <p>The 44-year-old, widely recognised by Aussie audiences from <em>Survivor Australia</em>, <em>Celebrity Apprentice</em>, <em>Rush</em> and <em>Getaway</em>, delivered a masterclass in risk-taking and intuition in NBC’s <em>Deal or No Deal Island</em>.</p> <p>Genat, dubbed the “Survivor golden god” after his 2020 <em>Survivor Australia: All Stars</em> victory, knew he had the upper hand early in the final showdown. But the real twist came when the show’s notorious banker was revealed as none other than Chrissy Teigen.</p> <p>Faced with 26 cases – one containing the life-changing sum of AUD$12.2 million – Genat navigated a nail-biting elimination round, fuelled by his father’s memory and a razor-sharp strategy. Rejecting a staggering seven offers, including multiple million-dollar deals, he played with nerves of steel until just two cases remained.</p> <p>Then came the final offer: a mind-blowing $US5.8 million ($AUD9.2 million). With tension at an all-time high, Genat made the call – he took the deal.</p> <p>It was a decision that paid off in monumental fashion. When his chosen case was opened, it contained just $75. Had he gambled one step further, he would have walked away with next to nothing. Instead, he etched his name into television history with the record-breaking win.</p> <p>“It was surreal,” Genat later shared with <em>USA Today</em>. <span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">“The offer came in at US$5.8 million and I started thinking about it, and that is just so much money. I was having a spiritual experience, man. I just knew where that money was. I knew which cases to open. I was looking for signs from my father, who passed away a couple of years ago. I felt his presence there, and he was just guiding me on what cases to open.”</span></p> <p>That deep connection gave him the clarity to seize the moment and walk away with a life-altering fortune. “My frequency is on another level,” he added. “I fully feel like I’m floating.”</p> <p><span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">With his newfound millions, Genat already has a few indulgences in mind, including a new motorcycle, a luxury watch and some sleek new cars for his four kids.</span></p> <p>But the adventure might not stop here. Rumours are swirling that Genat could be gearing up for another reality TV showdown on the upcoming <em>Survivor: Australia vs. the World</em>, set to air later this year.</p> <p><em>Images: Instagram</em></p>

Money & Banking

Placeholder Content Image

Official interest rates have been cut, but not everyone is a winner

<div class="theconversation-article-body"><a href="https://theconversation.com/profiles/isaac-gross-737430">Isaac Gross</a>, <em><a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a></em></p> <p>The Reserve Bank’s decision to cut interest rates for the first time in four years has triggered a round of celebration.</p> <p>Mortgage holders are cheering the fact their monthly repayments are now slightly lower, while the Albanese government hopes the small easing in the cost of living will <a href="https://theconversation.com/view-from-the-hill-will-albanese-opt-for-an-april-election-now-a-rate-cut-has-him-breathing-more-easily-250136">lift voters’ moods</a>.</p> <p>This is despite the Reserve Bank’s warnings that <a href="https://theconversation.com/the-reserve-bank-has-cut-rates-for-the-first-time-in-four-years-but-it-is-cautious-about-future-cuts-249704">further rate cuts may not eventuate</a>, depending on how much further progress is made on taming inflation.</p> <p>But it’s important to remember not everybody benefits from an interest rate cut. Some will be worse off.</p> <h2>Savers lose out</h2> <p>Not all Australian households are net borrowers. Many are net savers, retirees or prospective homebuyers, who actually lose out when rates fall.</p> <p>For starters, <a href="https://www.rba.gov.au/publications/fsr/2024/sep/contents.html">only about a third of households</a> are in hock to the banks when it comes to a monthly mortgage repayment.</p> <p>Another third of households have paid off their mortgage entirely, and so don’t benefit from a reduction in mortgage interest rates. And the remaining third are renters, who also don’t pay a mortgage.</p> <p>So while this news is generally a good thing for borrowers, a fall in mortgage rates only directly benefits a minority of households.</p> <p>Here are some of the ways lower interest rates might actually hurt rather than help the typical Australian household.</p> <h2>Higher house prices</h2> <p>One of the most immediate effects of lower interest rates is their impact on the housing market. With cheaper borrowing costs, more buyers can afford larger loans, bidding up house prices. This is great if you already own a home, but terrible if you’re still trying to buy one.</p> <p>For young Australians locked out of home ownership, a rate cut makes things even harder. It drives prices higher, forcing prospective buyers to stretch their finances further just to get a foot in the market. <a href="https://www.rba.gov.au/speeches/2024/sp-ag-2024-05-16.html">Reserve Bank calculations </a> suggest that, in the long run, higher house prices from lower rates can outweigh the benefit of lower mortgage repayments.</p> <h2>Lower returns on savings</h2> <p>If you’re a saver rather than a borrower, interest rate cuts are unequivocally bad news. Whether you’re saving for a home deposit, retirement, or just an emergency fund, lower rates mean you earn less on your bank deposits. The money in your savings account is now growing more slowly, making it harder to build wealth over time.</p> <p>Indeed, more than 20 banks actually cut their term deposit rates in advance of the Reserve Bank’s decision on Tuesday, according to <a href="https://www.canstar.com.au/home-loans/banks-slash-term-deposit-rates-february-2025/">Canstar research</a>.</p> <p>Analysis of HILDA data, <a href="https://www.rba.gov.au/publications/bulletin/2020/jun/household-wealth-prior-to-covid-19-evidence-from-the-2018-hilda-survey.html#:%7E:text=The%20HILDA%20Survey%20is%20a,observation%20available%20is%20for%202018.">which surveys household wealth and income</a>, suggests net savers tend to be younger households without property, retirees living off savings, and those who are not in full-time employment. For these groups, lower rates mean less income and fewer financial opportunities.</p> <h2>Retirees will feel the squeeze</h2> <p>Many <a href="https://www.rba.gov.au/publications/bulletin/2012/dec/pdf/bu-1212-3.pdf">retirees rely on income</a> from interest-bearing assets such as term deposits or cash savings. When rates fall, their returns shrink. The cost-of-living crisis has made it harder for retirees on a fixed income to fund their lifestyles, and a rate cut only makes things worse.</p> <p>While some retirees have exposure to the stock market via superannuation, many prefer the stability of cash savings. With rates falling, they face the tough choice of either reducing their spending or taking on more investment risk in their old age.</p> <h2>Bad news for the dollar, and overseas travellers</h2> <p>When the Reserve Bank cuts rates, it tends to <a href="https://www.rba.gov.au/education/resources/explainers/drivers-of-the-aud-exchange-rate.html">weaken the Australian dollar</a>. A weaker dollar makes overseas travel more expensive for Australians. That pint of beer in London, that piña colada in Puerto Rico, or that shopping trip to New York all become pricier.</p> <p>For Australians planning international holidays, rate cuts are a blow. A strong Australian dollar makes travel cheaper, and lower rates work against that. So while mortgage holders might celebrate, anyone hoping to travel overseas finds themselves worse off.</p> <h2>More expensive imports</h2> <p>Just as a weaker Australian dollar makes travel more expensive, it also increases the cost of imported goods. And Australia imports a lot – especially cars and petrol.</p> <p>Since the closure of domestic car manufacturing, all new vehicles sold in Australia are imported. Petrol, the second-largest import, is also sensitive to currency fluctuations. When the Australian dollar weakens due to lower interest rates, the cost of these essential goods rises. For the millions of Australians who rely on their cars for daily life, this is a significant financial burden.</p> <p>This isn’t to say rate cuts don’t benefit a large portion of Australians. Anyone with a significant mortgage debt will find themselves with lower monthly repayments, and that’s undoubtedly a financial relief.</p> <p>But the public narrative around interest rates tends to treat cuts as a universal good, ignoring the many Australians who are left worse off.</p> <p>Falling interest rates are a sign the high inflation that has caused the cost-of-living crisis has abated. That is <a href="https://www.rba.gov.au/media-releases/2025/mr-25-03.html">an economic success</a> that ought to be celebrated. But that now rates are falling again, we should at least acknowledge the costs that come with them.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/250140/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em>By <a href="https://theconversation.com/profiles/isaac-gross-737430">Isaac Gross</a>, Lecturer in Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a></em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/official-interest-rates-have-been-cut-but-not-everyone-is-a-winner-250140">original article</a>.</em></p> <p><em>Image: Shutterstock</em></p> </div>

Money & Banking

Placeholder Content Image

Big banks finally cut fixed-interest mortgage rates

<p>NAB has become the first big bank to announce it has cut its fixed rate mortgages across all loan terms.</p> <p>The bank is the first of the big four banks to cut its fixed rates in 2025, two weeks out from the Reserve Bank of Australia’s first meeting when it is tipped to cut the cash rate.</p> <p>NAB announced on Monday that their lowest fixed rate is now 5.84 per cent, with a deposit of at least 20 per cent on a three-year term.</p> <p>“NAB is the first of the big four banks to cut fixed rates in 2025, with other banks likely to follow,” Canstar data insights director Sally Tindall said.</p> <p>“The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates.”</p> <p>The cuts from NAB come almost two weeks after Macquarie Bank lowered its fixed rates, however, ANZ still has the lowest fixed rate out of the big four banks at 5.74 per cent for a two-year or three-year term.</p> <p>“While a few banks are now starting to sharpen their offerings, fixed rates still have a way to fall before they become fashionable again with borrowers,” Tindall said.</p> <p>“We expect the big four banks in particular to pass on cash rate cuts in full, at least for the first couple of cash rate cuts,” she said.</p> <p>“But we might even see some banks choose to pass on even more to new customers in order to take advantage of that re-engagement for borrowers in what a competitive rate looks like.”</p> <p>“Many homeowners have been waiting for well over a year for a cash rate cut. It’s hard to see them throwing in the towel and switching to a fixed rate now when the RBA is poised to move."</p> <p>“That said, there’s no guarantee we’ll see a barrage of cash rate cuts and borrowers should factor this into their thinking.”</p> <p><em>Image credits: Shutterstock </em></p> <p class="mb-4 font-serif text-article-body" style="font-family: var(--font-google-newsreader),serif; box-sizing: border-box; border: 0px solid; margin: 0px 0px 24px; font-size: 1.2275rem; line-height: 26.514px; caret-color: #2a2a2a; color: #2a2a2a;"> </p>

Money & Banking

Placeholder Content Image

Readers response: What’s the most interesting cultural experience you've had while travelling?

<p>When travelling abroad, we are often exposed to new and fascinating cultures that can open our eyes to different ways of life.</p> <p>We asked our readers to share the most interesting cultural experience they've had while travelling, and the response was overwhelming. Here's what they said.</p> <p><strong>Sandra Beckett</strong> - Staying overnight in a Ger in Mongolia miles from anywhere, listening to Throat singing accompanied by two traditionally dressed musicians playing Horsehead fiddles. Also, travelling across Russia by train, visiting the Galapagos islands, Skara Brae in the Orkneys, the Hagia Sophia in Istanbul.</p> <p><strong>Denise Ryan</strong> - Listening to glorious classical music played in Havana’s Plaza de la Catedral and attending a stunning performance of Swan Lake in the Grand Theatre of Havana.</p> <p><strong>Deedee Cullum</strong> - Visiting Ypres in Belgium and staying the night so we could see the evening ceremony at the Menin gate.</p> <p><strong>Alison Davenport</strong> - 50 years ago visiting a Fijian village made me realise everyone didn't live like I did. Have been amazed at all travel experiences since.</p> <p><strong>Glenn Turton</strong> - Staying in a farmhouse in Normandy for a week. Visiting D-Day beaches and Mont St Michel from there and local villages and markets on the days between. Back to the farmhouse each night to cook local produce and sit by an open fire.</p> <p><strong>Karen Psaila</strong> - Sitting in a small ally sipping black sweet tea in Egypt looking at the pyramids and sphinx whilst camels are strolling by. Amazing.</p> <p><strong>Patricia Watson</strong> - Darwin. Spending a day with First Nation Women and Children in the bush and learning about food that grows and is edible in that area.</p> <p><strong>James Langabeer</strong> - This are my three top three most interesting cultural experiences.</p> <p>1. Japan's Tea Ceremony: Attending a traditional tea ceremony in Kyoto, Japan, where I learned about the intricate rituals and Zen Buddhism's influence.</p> <p>2. Indian Holi Festival: Celebrating Holi, the Festival of Colors, in Mumbai, India, surrounded by vibrant colors, music, and joyful locals.</p> <p>3. Moroccan Hammam: Experiencing a traditional Moroccan bathhouse (hammam) in Marrakech, where I discovered local customs and relaxation techniques.</p> <p><strong>Margaret Mason</strong> - Staying for a couple of days in a small, traditional village in China.</p> <p><em>Image credits: Shutterstock </em></p>

International Travel

Placeholder Content Image

Rare coin hidden for decades to fetch eye-watering sum

<p>Three sisters from the US who inherited a dime coin kept it in a bank vault for more than 40 years, and while they know it had some value, they didn't know just how much until a few years ago. </p> <p>The rare coin, struck by the US Mint in San Francisco in 1975, could be worth more than $US500,000 ($748,000), according to Ian Russell, president of GreatCollections, the auction house selling the coin. </p> <p>What makes the coin depicting President Franklin D. Roosevelt so valuable is that it is just one of two coins missing the "S" mint mark for San Francisco. </p> <p>The other dime sold for  $US682,000 (over $1 million) at a 2019 auction and then again months later to a private collector. </p> <p>While avid coin collectors have known about the existence of these two extraordinarily rare coins, their whereabouts had remained a mystery since the late 1970s. </p> <p>“They were hidden for decades,” Russell said.</p> <p>“Most major collectors and dealers have never seen one.”</p> <p>The three sisters from Ohio, who want to remain anonymous,  inherited one of the two dimes after the recent death of their of their brother, Russell said. </p> <p>They told Russell that their brother and mother bought the first error coin discovered in 1978 for $27,225, which would amount to roughly $135,000 today.</p> <p>Their parents, who ran a dairy farm, saw the coin as a financial safety net, and it was only until last year that one of the sisters saw the coin first-hand. </p> <p>Russell also said that their brother had reached out to him about seven years ago and told him about the coin, but he too kept it a secret. </p> <p>When Russell told one of the sisters about the potential value of the coin, she told him: “is that really possible?”. </p> <p>The coin, known as the “1975 ‘no S’ proof dime,” will be displayed at a coin show beginning on Wednesday in Tampa, Florida, and before <a href="https://www.greatcollections.com/Coin/1655587" target="_blank" rel="noopener">the auction</a> closes late next month, Russell said.</p> <p>The current highest bidder has offered $US250,000 ($374,000).</p> <p><em>Images: Great Collections/ Professional Coin Grading Services</em></p>

Money & Banking

Placeholder Content Image

Readers response: Who’s the most interesting person you’ve met while travelling?

<p>One of the best parts of travelling is the people you met along the way. </p> <p>Whether it's as part of a tour group or an interesting character you meet by chance, interacting with interesting people in interesting places can bring a lot to your travel experience. </p> <p>We asked our readers to tell us about the most interesting person they've encountered on their travels and the response was overwhelming. Here's what they said. </p> <p><strong>Diana Jason</strong> - Cargo Holly Harrison. He walked 15000 miles from the bottom of South America to the top of Alaska. A truly fascinating man.</p> <p><strong>Margie Buckingham</strong> - While caravanning around Oz, every night we would meet interesting ppl enjoying pre-dinner drinks &amp; nibbles around the campfire. We all had personal stories to tell or the best places to camp.</p> <p><strong>Ann Smith</strong> - Myself. Travelled to the UK and found my independence and confidence, two and a bit years after I lost love of my life to cancer.</p> <p><strong>Pamela Cari</strong> - We met the lady who played the mother of Apollonia Vitelli in The Godfather when we were in Savoca.</p> <p><strong>Rosalie Busch</strong> - A couple who grew up behind the wall in East Berlin. </p> <p><strong>Sue Velvin</strong> - Shaquille O'Neal when my daughter and I had a holiday in the states a few years ago! Awesome man.</p> <p><strong>Wendy Farnham</strong> - A Buddhist Nun in Cambodia who lost her husband and 6 of her 7 children to starvation under Pol Pot’s regime.</p> <p><strong>Lyn Schuemaker</strong> - Everybody. They all have stories to tell.</p> <p><em>Image credits: Shutterstock </em></p>

International Travel

Placeholder Content Image

Grant Denyer serenades one of Australia's oldest Deal or No Deal contestants

<p>In the latest feelgood episode of <em>Deal or No Deal</em>, 94-year-old contestant  Phyllis Goldsack was given the chance to win $100,000. </p> <p>As one of the oldest contestants on the show, Phyllis kept everyone entertained as she challenged the banker.</p> <p>In one particularly sweet moment, game show host Grant Denyer serenaded her with a special song.</p> <p>A clip of the moment was shared on X, formerly known as Twitter, with the caption: "We're not crying, you're crying,"  and the crying emoji. </p> <p>"Okay the deal is, if I serenade you, with the song of your choosing, you get $800 from my pocket," Grant told Phyllis in the show. </p> <p>The audience were touched when Phyllis revealed that her late husband only ever sang her one song when he proposed, <em style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">You Are My Sunshine.</em></p> <blockquote class="twitter-tweet"> <p dir="ltr" lang="en">We're not crying, you're crying! 😭<a href="https://twitter.com/hashtag/DealOrNoDealAU?src=hash&amp;ref_src=twsrc%5Etfw">#DealOrNoDealAU</a> 6.00 Weeknights on <a href="https://twitter.com/Channel10AU?ref_src=twsrc%5Etfw">@channel10au</a> and 10 Play. <a href="https://t.co/CVR0M5rq7y">pic.twitter.com/CVR0M5rq7y</a></p> <p>— Deal Or No Deal Australia (@DealOrNoDealAUS) <a href="https://twitter.com/DealOrNoDealAUS/status/1756942546767339956?ref_src=twsrc%5Etfw">February 12, 2024</a></p></blockquote> <p><span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">"Should we do it one more time maybe?" Grant asked Phyllis who eagerly replied: "yes, you sing it for me". </span></p> <p><span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">The crowd joined in and serenaded the 94 year old. </span></p> <p>“Thank you, you know you have made me feel so happy,” she told Grant. </p> <p>Although Phyllis did not win the $100,000, she went home $9,255 richer, which was the best offer she received from the banker. </p> <p>“That’s why I do this show!” Grant said. </p> <p><em>Images: X</em></p>

TV

Placeholder Content Image

Five ways to take advantage of rising interest rates to boost your savings

<p><em><a href="https://theconversation.com/profiles/fredrick-kibon-changwony-234363">Fredrick Kibon Changwony</a>, <a href="https://theconversation.com/institutions/university-of-stirling-1697">University of Stirling</a></em></p> <p>With the Bank of England base rate <a href="https://theconversation.com/how-the-bank-of-englands-interest-rate-hikes-are-filtering-through-to-your-finances-210344">currently the highest</a> it has been since early 2008, you may have a valuable opportunity to increase your earnings on pensions, investments and savings accounts. After all, when the central bank raises its main rate – the base rate, which is typically used as a benchmark for loans as well as savings accounts – it is trying to encourage people to spend less and save more.</p> <p>But UK banks and building societies have <a href="https://www.independent.co.uk/money/martin-lewis-savings-rates-mortgage-crisis-b2362955.html">recently been accused</a> of letting their savings rates lag the recent rapid rise in the base rate. UK regulator the Financial Conduct Authority has urged these financial firms to offer “<a href="https://www.fca.org.uk/news/press-releases/action-plan-cash-savings">fair and competitive</a>” savings rates in response to the increasing interest rates.</p> <p>Many financial institutions do offer accounts with <a href="https://www.theguardian.com/money/2023/jul/15/uk-savings-accounts-interest-nsi-building-societies-banks-deals">rates of 6% or more</a>. This is good news for avid savers – but only if you keep an eye on the market so you can switch from less competitive products. This is why it’s important to establish a regular savings habit, but many people are unsure about what that should involve.</p> <p>My colleagues and I have studied the <a href="https://dspace.stir.ac.uk/handle/1893/32240">correlation between people’s savings goals</a> (if they have any) and how they invest their money. We also looked at how seeking financial information advice, and being “good with numbers”, both influence this correlation.</p> <p>We analysed data from more than 40,000 individuals in 21,000 UK households from five waves of the Office for National Statistics Wealth and Assets Survey (WAS), conducted between 2006 and 2016. This data captures comprehensive economic wellbeing information and attitudes to financial planning.</p> <p>Our research shows the importance to your finances of setting multiple savings goals, keeping up with financial news, and seeking professional advice. Based on this, here are five research-based ways to make the most of your money.</p> <h2>1. Set specific savings goals</h2> <p>Establishing personal savings goals is one of the first steps most financial institutions and advisers will recommend to their customers, because it’s a good idea to <a href="https://www.investopedia.com/terms/c/compoundinterest.asp">save regularly</a>. Plus, our study shows that total financial assets increase in line with the number of savings goals you have, and that setting specific, rather than vague, goals leads to higher performance.</p> <p>Specific savings goals should have an end date, target figure, and even a meaningful name – for example, “£1,000 for 2024 trip to Asia” or “£250 for 2023 Christmas present fund”. This will create tangible reference points that encourage self-control and increase the pain you feel if you fail to meet your goal.</p> <h2>2. Seek professional financial advice</h2> <p>Rather than relying on friends, family and social media for financial advice, speak to an expert.</p> <p>Our research shows households that access professional financial advice were more likely to allocate a higher share of their wealth to stock portfolios than those that rely on friends, family and social media for financial advice. This result was consistent even across different wealth and income levels, with lower earners possibly using products like ISAs to make investments in stocks and shares. Other <a href="https://academic.oup.com/qje/article/134/3/1225/5435538">research shows</a> stock portfolios outperform most other types of investment in the long term.</p> <p>We also found that access to professional financial advice can substitute for setting goals, because your adviser should help you to determine the kinds of products to invest in (which is called asset allocation) for specific timelines and aims.</p> <h2>3. Brush up on your maths</h2> <p><a href="https://doi.org/10.1111/j.1475-5890.2007.00052.x">Several studies</a> show numerical skills affect how households gather and process information, <a href="https://psycnet.apa.org/doi/10.1037/a0013114">set goals</a>, perceive risks, and <a href="https://heinonline.org/HOL/P?h=hein.journals/fedred89&amp;i=791">decide to invest</a> in various financial assets. So, by brushing up on your basic numeracy and financial literacy skills – even with free online videos – you could boost your savings for the long term.</p> <p>Our study shows that individuals with high confidence in their numerical skills tend to have better financial planning habits – such as investing more in stocks and bonds than cash, which carries more risk but also the potential for greater returns. This trend is particularly evident among households with no savings goals, suggesting that numerical ability could compensate for failing to set such goals.</p> <h2>4. Adopt appropriate savings strategies</h2> <p>Diversified stock market portfolios generally outperform bonds and cash savings <a href="https://doi.org/10.1093/qje/qjz012">over longer periods</a>. However, stock markets can be volatile, so putting savings into less risky assets like bonds and cash is wise for savings goals of less than five years.</p> <p>In the longer term, investing across different global stock markets for more than five years can help counteract inflation. And you can access low-cost, diversified investment portfolios via financial products based on indices of stocks or other assets, such as exchange traded funds.</p> <h2>5. Set, monitor and adjust your plan</h2> <p>Free financial planning and budgeting apps can help you save money by tracking your spending and savings goals, and encouraging you to adhere to a budget.</p> <p>Most importantly, once you set savings goals and create a budget, don’t forget about them. Check regularly to see how your savings are building up and to monitor for any spending changes. A growing array of fintech tools can prompt and encourage this kind of long-term planning.</p> <p>Keeping an eye on savings rates is also important. As banks change rates or create new accounts, consider switching to get a better deal if you can do so without falling foul of account closure fees.</p> <p>It’s important to make sure your savings are working for you at any time, but its crucial in the current economy, when finances are tight but interest rates are rising.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/208853/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a href="https://theconversation.com/profiles/fredrick-kibon-changwony-234363">Fredrick Kibon Changwony</a>, Lecturer in Accounting &amp; Finance, <a href="https://theconversation.com/institutions/university-of-stirling-1697">University of Stirling</a></em></p> <p><em>Image credits: Shutterstock</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/five-ways-to-take-advantage-of-rising-interest-rates-to-boost-your-savings-208853">original article</a>.</em></p>

Money & Banking

Placeholder Content Image

Forcing people to repay welfare ‘loans’ traps them in a poverty cycle – where is the policy debate about that?

<p><em><a href="https://theconversation.com/profiles/hanna-wilberg-1466649">Hanna Wilberg</a>, <a href="https://theconversation.com/institutions/university-of-auckland-1305">University of Auckland</a></em></p> <p>The National Party’s <a href="https://www.1news.co.nz/2023/09/26/more-sanctions-for-unemployed-beneficiaries-under-national/">pledge to apply sanctions</a> to unemployed people receiving a welfare payment, if they are “persistently” failing to meet the criteria for receiving the benefit, has attracted plenty of comment and <a href="https://www.1news.co.nz/2023/09/26/nationals-benefit-sanctions-plan-cruel-dehumanising-greens/">criticism</a>.</p> <p>Less talked about has been the party’s promise to index benefits to inflation to keep pace with the cost of living. This might at least provide some relief to those struggling to make ends meet on welfare, though is not clear how much difference it would make to the current system of indexing benefits to wages.</p> <p>In any case, this alone it is unlikely to break the cycle of poverty many find themselves in.</p> <p>One of the major drivers of this is the way the welfare system pushes some of the most vulnerable people into debt with loans for things such as school uniforms, power bills and car repairs.</p> <p>The government provides one-off grants to cover benefit shortfalls. But most of these grants are essentially loans.</p> <p>People receiving benefits are required to repay the government through weekly deductions from their normal benefits – which leaves them with even less money to survive on each week.</p> <p>With <a href="https://www.stuff.co.nz/pou-tiaki/132980318/auckland-mother-serves-up-cereal-for-dinner-due-to-rising-food-costs">rising costs</a>, the situation is only getting worse for many of the 351,756 New Zealanders <a href="https://figure.nz/chart/TtiUrpceJruy058e-ITw010dHsM6bvA2a">accessing one of the main benefits</a>.</p> <h2>Our whittled down welfare state</h2> <p>Broadly, there are three levels of government benefits in our current system.</p> <p>The main benefits (such as jobseeker, sole parent and supported living payment) <a href="https://www.workandincome.govt.nz/products/benefit-rates/benefit-rates-april-2023.html">pay a fixed weekly amount</a>. The jobseeker benefit rate is set at NZ$337.74 and sole parents receive $472.79 a week.</p> <p>Those on benefits have access to a second level of benefits – weekly supplementary benefits such as an <a href="https://www.workandincome.govt.nz/products/a-z-benefits/accommodation-supplement.html">accommodation supplement</a> and other allowances or tax credits.</p> <p>The third level of support is one-off discretionary payments for specific essential needs.</p> <p>Those on benefits cannot realistically make ends meet without repeated use of these one-off payments, unless they use assistance from elsewhere – such as family, charity or borrowing from loan sharks.</p> <p>This problem has been building for decades.</p> <h2>Benefits have been too low for too long</h2> <p>In the 1970s, the <a href="https://mro.massey.ac.nz/handle/10179/12967">Royal Commission on Social Security</a> declared the system should provide “a standard of living consistent with human dignity and approaching that enjoyed by the majority”.</p> <p>But Ruth Richardson’s “<a href="https://www.stuff.co.nz/the-press/christchurch-life/124978983/1991-the-mother-of-all-budgets">mother of all budgets</a>” in 1991 slashed benefits. Rates never recovered and today’s <a href="https://www.1news.co.nz/2022/03/29/benefit-increases-will-still-leave-families-locked-in-poverty/">benefits are not enough to live on</a>.</p> <p>In 2018, the <a href="https://www.weag.govt.nz/">Welfare Expert Advisory Group</a> looked at how much money households need in two lifestyle scenarios: bare essentials and a minimum level of participation in the community, such as playing a sport and taking public transport.</p> <p>The main benefits plus supplementary allowances did not meet the cost of the bare essentials, let alone minimal participation.</p> <p>The Labour government has since <a href="https://www.beehive.govt.nz/release/government-delivers-income-increases-over-14-million-new-zealanders">increased benefit rates</a>, meaning they are now slightly above those recommended by the advisory group. But those recommendations were made in 2019 and don’t take into account the <a href="https://www.stats.govt.nz/news/annual-inflation-at-6-0-percent">sharp rise in inflation</a> since then.</p> <p>Advocacy group <a href="https://fairerfuture.org.nz/">Fairer Future</a> published an updated assessment in 2022 – nine out of 13 types of households still can’t meet their core costs with the current benefit rates.</p> <h2>How ‘advances’ create debt traps</h2> <p>When they don’t have money for an essential need, people on benefits can receive a “special needs grant”, which doesn’t have to be repaid. But in practice, Work and Income virtually never makes this type of grant for anything except food and some other specific items, such as some health travel costs or emergency dental treatment.</p> <p>For <a href="https://www.1news.co.nz/2023/02/27/very-stressful-beneficiary-says-he-cant-afford-msd-debt/">all other essential needs</a> – such as school uniforms, car repairs, replacing essential appliances, overdue rent, power bills and tenancy bonds – a one-off payment called an “advance” is used. Advances are loans and have to be paid back.</p> <p>There are several issues with these types of loans.</p> <p>First, people on benefits are racking up thousands of dollars worth of debts to cover their essential needs. It serves to trap them in financial difficulties for the foreseeable future.</p> <p>As long as they remain on benefits or low incomes, it’s difficult to repay these debts. And the <a href="https://www.legislation.govt.nz/act/public/2018/0032/latest/whole.html">Social Security Act 2018</a> doesn’t allow the Ministry of Social Development (MSD) to waive debts.</p> <h2>Contradictory policies</h2> <p>Another problem is that people on benefits have to start repaying their debt straight away, with weekly deductions coming out of their already limited benefit.</p> <p>Each new advance results in a further weekly deduction. Often these add up to $50 a week or more. MSD policy says repayments should not add up to more than $40 a week, but that is often ignored.</p> <p>This happens because the law stipulates that each individual debt should be repaid in no more than two years, unless there are exceptional circumstances. Paying this debt off in two years often requires total deductions to be much higher than $40.</p> <p>The third issue is that one-off payments can be refused regardless of the need. That is because there are two provisions pulling in opposite directions.</p> <p>On the one hand the law says a payment should be made if not making it would cause serious hardship. But on the other hand, the law also says payments should not be made if the person already has too much debt.</p> <p>People receiving benefits and their case managers face the choice between more debt and higher repayments, or failing to meet an essential need.</p> <h2>Ways to start easing the burden</h2> <p>So what is the fix? A great deal could be achieved by just changing the policies and practices followed by Work and Income.</p> <p>Case managers have the discretion to make non-recoverable grants for non-food essential needs. These could and should be used when someone has an essential need, particularly when they already have significant debt.</p> <p>Weekly deductions for debts could also be automatically made very low.</p> <p>When it comes to changing the law, the best solution would be to make weekly benefit rates adequate to live on.</p> <p>The government could also make these benefit debts similar to student loans, with no repayments required until the person is off the benefit and their income is above a certain threshold.</p> <p>However we do it, surely it must be time to do something to fix this poverty trap.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/212528/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><a href="https://theconversation.com/profiles/hanna-wilberg-1466649"><em>Hanna Wilberg</em></a><em>, Associate professor - Law, <a href="https://theconversation.com/institutions/university-of-auckland-1305">University of Auckland</a></em></p> <p><em>Image credits: Getty Images </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/forcing-people-to-repay-welfare-loans-traps-them-in-a-poverty-cycle-where-is-the-policy-debate-about-that-212528">original article</a>.</em></p>

Money & Banking

Placeholder Content Image

Carrie Bickmore's rumoured TV return

<p>Carrie Bickmore is rumoured to be the next host of the upcoming reboot of the iconic Aussie game show <em>Deal or No Deal. </em></p> <p>The former <em>The Project </em>anchor is the front-runner to host the series which is set to air on Channel 10 next year. </p> <p>It is understood that the network is desperate to get Bickmore onboard, but with fame comes a hefty price tag. </p> <p>“She’s one of the biggest stars in Australia and she comes with a very big price tag,” a source reportedly told <em>New Idea</em>, revealing that her current rate is believed to be over $500,000.</p> <p>“Deal or No Deal is currently lined up to air at 6pm as the lead-in to The Project - with hopes those eyeballs that tune in to the game show will stay on to watch Sarah Harris, Waleed Aly, and the gang,” the source added. </p> <p>“It’d be a win-win for the network, getting Carrie back on TV and hosting a show that could actually get people back into watching The Project - it’s sort of genius.”</p> <p>However, she isn't the only star the broadcaster have their eyes on. </p> <p>Peter Helliar is also rumoured to be part of the line up, with a much cheaper price tag. </p> <p><em>Deal or No Deal</em> first aired in 2003 on Channel 7, and had a ten-year run before the show was axed.</p> <p>Although there's no set date for the when the show will air just yet, they are looking for their next stars with <a href="https://eu.castitreach.com/ag/esgau/dond/welcome.html" target="_blank" rel="noopener">casting calls</a> open for those over 18. </p> <p>Image: </p>

TV

Placeholder Content Image

Why you’re probably paying more interest on your mortgage than you think

<p><em><a href="https://theconversation.com/profiles/sander-de-groote-1472267">Sander De Groote</a>, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> and <a href="https://theconversation.com/profiles/kevin-li-892606">Kevin Li</a>, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a></em></p> <p>For most things we buy, the price we are quoted is the price we pay.</p> <p>That’s supposed to be the case even where taxes and fees are involved. Australian law requires anyone selling anything to display a <a href="https://www.accc.gov.au/business/pricing/price-displays">total price</a> that includes all “taxes, duties and all unavoidable or pre-selected extra fees”.</p> <p>But our investigations, which compare the interest rate quoted on our mortgages with the fine print in our own mortgage documents, shows this is hardly ever the case for home loans.</p> <p>Even though we are both trained as accountants, until recently we hadn’t bothered to check – even as interest rates climbed. We assumed the rates we were being told we were being charged (say 5% per year) were the rates we were actually paying.</p> <p>This would be easy enough, and in our view the right thing, for banks to do.</p> <h2>The price quoted usually isn’t the price paid</h2> <p>Mortgage interest is usually charged monthly, but the rates are yearly. This means that each time interest is charged, the outstanding amount <a href="https://www.investopedia.com/terms/c/compoundinterest.asp">compounds</a> as interest is applied to interest.</p> <p>That sounds bad enough. But this isn’t our main complaint.</p> <p>It’s that there are two possible ways to calculate the amount of interest. Banks calcualte interest on a daily basis.</p> <p>The most reasonable would be to calculate the daily amount in a way that adds up to an annual amount that matches what was quoted. That way, a 5% rate would really be 5%.</p> <p>Although there’s a bit of <a href="https://cdn.theconversation.com/static_files/files/2814/compound_example.pdf">calculation</a> involved, it’s easy enough for banks to do.</p> <h2>How banks calculate mortgage interest</h2> <p>The other, arguably less reasonable, way is what’s called the “<a href="https://www.investopedia.com/articles/investing/020614/learn-simple-and-compound-interest.asp">simple</a>” method. Our investigations show that this technique is used by all the big four banks, and probably many others too.</p> <p>It’s called the simple method because it involves simply dividing the annual rate (say 5%) by 365 to determine the daily rate.</p> <p>This seems to not be important, but because of compounding it means the amount charged over a year is more than the rate quoted.</p> <p>Say you borrow $100,000 for one year at an annual rate of 5%, repaying the whole amount at the end of the year.</p> <p>You might expect to pay back $105,000. Instead, the banks’ method of calculating interest results in a total repayment of $105,116.</p> <p>This is because the daily interest rate (5% divided by 365) is applied to the outstanding balance <em>each day</em> and added to your balance once a month. These regular increases mean your interest compounds costing you more.</p> <h2>Over decades, the difference matters</h2> <p>In July 2023, the average size of a new mortgage in New South Wales was about A$750,000, with an average interest rate of about 5.95%.</p> <p>The method of calculation used by the banks and in the fine print of their mortgage contracts requires a monthly payment of $4,473 including the repayment of the amount originally borrowed over the life of a 30-year loan.</p> <p>But if 5.95% were actually charged each year, the monthly payment would be $4,398 – a difference of $900 per year.</p> <p>In this typical example, the difference over the life of the loan amounts to about $27,000. It means these borrowers will end up paying an effective interest rate of 6.11%.</p> <h2>We had to read the fine print</h2> <p>We checked the terms and conditions of each of the big four banks – Westpac, the Commonwealth, the National Australia Bank and the ANZ – as well as their biggest subsidiaries which include St George, The Bank of Melbourne, Bank SA and Bankwest.</p> <p>They all charge interest using the “simple” method.</p> <p>Mutual banks – the old credit unions and building societies owned by their members – have different reporting requirements, and we were unable to check the terms and conditions used by each one. But where we could, we found they used the same method as the big four.</p> <p>You can find this small print yourself, usually in the middle of your mortgage document. It’s a formula, accompanied by a paragraph of explanation.</p> <p>But you have to look carefully. Or you could call customer service, as we did, and ask the bank to explain the calculation.</p> <p>You shouldn’t have to.</p> <h2>The price quoted ought to be the price paid</h2> <p>We think the price quoted for a product should be the price that’s actually charged, as the law <a href="https://www.accc.gov.au/business/pricing/price-displays">generally requires</a> for products other than mortgages.</p> <p>This means if you are told you’ll be charged 5.95% interest per year, you should pay 5.95% per year – not 6.11% because of a quirk in the formula.</p> <p>Mortgages are a larger financial commitment than most purchases. This means that honesty and clear communication are even more important.</p> <p>It’s worth knowing what you are letting yourself in for when signing up for a mortgage. That way, when the bank or broker explains it to you and it’s not what was advertised, you can ask for a discount.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/213862/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a href="https://theconversation.com/profiles/sander-de-groote-1472267">Sander De Groote</a>, Lecturer, School of Accounting, Auditing and Taxation, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a> and <a href="https://theconversation.com/profiles/kevin-li-892606">Kevin Li</a>, Senior Lecturer, School of Accounting, Auditing and Taxation, <a href="https://theconversation.com/institutions/unsw-sydney-1414">UNSW Sydney</a></em></p> <p><em>Image credits: Getty Images</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/why-youre-probably-paying-more-interest-on-your-mortgage-than-you-think-213862">original article</a>.</em></p>

Money & Banking

Placeholder Content Image

“Breaking Aussies’ spirits”: Karl rips into Reserve Bank

<p dir="ltr">Karl Stefanovic has ripped into the Reserve Bank for their decision to pause interest rates at an all time high. </p> <p dir="ltr">The <em>Today</em> host blasted their decision to freeze the cash rate at an 11-year high of 4.1 percent, as Aussies continue to struggle through the cost of living crisis. </p> <p dir="ltr">Karl Stefanovic has accused the Reserve Bank of “not giving a toss” about the millions of Australians struggling to keep their homes amid seemingly endless interest rate rises. </p> <p dir="ltr">On Thursday, Karl let loose on the RBA, slamming their decision to put Aussies under further financial strain.</p> <blockquote class="instagram-media" style="background: #FFF; border: 0; border-radius: 3px; box-shadow: 0 0 1px 0 rgba(0,0,0,0.5),0 1px 10px 0 rgba(0,0,0,0.15); margin: 1px; max-width: 540px; min-width: 326px; padding: 0; width: calc(100% - 2px);" data-instgrm-permalink="https://www.instagram.com/reel/CuQTWInBqdU/?utm_source=ig_embed&amp;utm_campaign=loading" data-instgrm-version="14"> <div style="padding: 16px;"> <div style="display: flex; flex-direction: row; align-items: center;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 40px; margin-right: 14px; width: 40px;"> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 100px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 60px;"> </div> </div> </div> <div style="padding: 19% 0;"> </div> <div style="display: block; height: 50px; margin: 0 auto 12px; width: 50px;"> </div> <div style="padding-top: 8px;"> <div style="color: #3897f0; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: 550; line-height: 18px;">View this post on Instagram</div> </div> <div style="padding: 12.5% 0;"> </div> <div style="display: flex; flex-direction: row; margin-bottom: 14px; align-items: center;"> <div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(0px) translateY(7px);"> </div> <div style="background-color: #f4f4f4; height: 12.5px; transform: rotate(-45deg) translateX(3px) translateY(1px); width: 12.5px; flex-grow: 0; margin-right: 14px; margin-left: 2px;"> </div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(9px) translateY(-18px);"> </div> </div> <div style="margin-left: 8px;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 20px; width: 20px;"> </div> <div style="width: 0; height: 0; border-top: 2px solid transparent; border-left: 6px solid #f4f4f4; border-bottom: 2px solid transparent; transform: translateX(16px) translateY(-4px) rotate(30deg);"> </div> </div> <div style="margin-left: auto;"> <div style="width: 0px; border-top: 8px solid #F4F4F4; border-right: 8px solid transparent; transform: translateY(16px);"> </div> <div style="background-color: #f4f4f4; flex-grow: 0; height: 12px; width: 16px; transform: translateY(-4px);"> </div> <div style="width: 0; height: 0; border-top: 8px solid #F4F4F4; border-left: 8px solid transparent; transform: translateY(-4px) translateX(8px);"> </div> </div> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center; margin-bottom: 24px;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 224px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 144px;"> </div> </div> <p style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; line-height: 17px; margin-bottom: 0; margin-top: 8px; overflow: hidden; padding: 8px 0 7px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"><a style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: normal; line-height: 17px; text-decoration: none;" href="https://www.instagram.com/reel/CuQTWInBqdU/?utm_source=ig_embed&amp;utm_campaign=loading" target="_blank" rel="noopener">A post shared by thetodayshow (@thetodayshow)</a></p> </div> </blockquote> <p dir="ltr">“They have single-handedly crushed, strangled Australian households,” he said.</p> <p dir="ltr">“Aussies who go to work, pay their bills, and just made the mistake of wanting to own their own home. Now you are being held to ransom.”</p> <p dir="ltr">“Everything you have built is now on the line because our central bank missed the inflation tidal wave. This is what's worse though.”</p> <p dir="ltr">“It's not over-spending respective governments carrying the can. It's you at home.” </p> <p dir="ltr">“It's you trying to put food on the table, pay your power bills and keep a roof over your family's head. It's no wonder it's breaking Aussies' spirits right now.”</p> <p dir="ltr">On Tuesday, the RBA moved to pause interest rates at an 11-year high of 4.1 per cent for the next month. </p> <p dir="ltr">Governor Philip Lowe hinted at more monetary policy tightening because inflation is still too high, even after the most aggressive rate rises since 1989.</p> <p dir="ltr">Even if interest rates don't rise again, mortgage repayments could still be hiked.</p> <p dir="ltr"><em>Image credits: Today</em></p>

TV

Placeholder Content Image

Pop star discovered tragically dead at 33 in the wake of scandal

<p>South Korean pop star Choi Sung-bong, who was caught running a notorious cancer scam has passed away at age 33.</p> <p><em>The Korean Times</em> reported that Choi was found by police at his Seoul home on the morning of June 20. He was pronounced dead soon after.</p> <p>Authorities have reportedly ruled the singer’s cause of death as a suicide.</p> <p>According to the Hollywood Reporter, after years of online fame stemming from a 2011 performance on Korea’s Got Talent, Choi confessed he had tricked his fans into donating money to him after claiming he needed funds for cancer treatment.</p> <p>Choi had claimed he had been battling multiple forms of cancer to obtain the donations, however, his claims were later exposed as a hoax.</p> <p>He also claimed he had returned all donated funds from a false fundraiser.</p> <p>Choi later issued a grovelling apology and vowed to return all of the donations sent by his fans.</p> <p>One day before his alleged suicide, Choi posted a note on his YouTube channel apologising for “foolish mistakes” in the past, according to The Mirror.</p> <p>The chilling letter said he needed to "repay for his sins with his life” and showed the address of where his body would be after taking his life.</p> <p>“My body can be found at [his home location]. I don’t know how to write a final message, so I will just write it in my own style. Even though my breath may have stopped now, I have no regrets about the brilliant journey of my life. I have lived my life to the fullest and made efforts to find happiness every day. Age thirty-four," (as per Korean age system), he said.</p> <p>Choi was best known for competing in Korea’s Got Talent in 2011, coming in at second place.</p> <p><a href="https://www.youtube.com/watch?v=vIy99OT2BAQ" target="_blank" rel="noopener"><iframe src="https://www.youtube.com/embed/vIy99OT2BAQ"></iframe></a></p> <p>A clip of him singing a cover of Nella Fantasia by Ennio Morricone quickly went viral online, thrusting him into the spotlight  – <span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">with singing sensation Justin Bieber even acknowledging his talent.</span></p> <p><em>Image credit: YouTube</em></p>

Caring

Placeholder Content Image

RBA announces major interest rate rise

<p>The Reserve Bank of Australia has lifted its official interest rate to 4.1 per cent, an increase not seen since early 2012.</p> <p>The bank’s board chose to lift the cash rate target by 0.25 of a percentage point for the second month in a row amid concerns that inflation is taking too long to decrease.</p> <p>The latest monthly consumer price index from the Australian Bureau of Statistics saw prices rise 6.8 per cent from 2022 to April 2023, up from the March reading due to statistical uncertainties caused by last year’s temporary fuel excise cut.</p> <p>Reserve Bank governor Phillip Lowe warned the public about rising costs of services including hospitality which are labour intensive and vulnerable to increased wages.</p> <p>"Recent data indicate that the upside risks to the inflation outlook have increased and the board has responded to this," he highlighted in his post-meeting statement.</p> <p>"While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.”</p> <p>Lowe noted the most recent and bigger than expected rise in minimum and award wages, which was the highest increase in decades.</p> <p>"Wages growth has picked up in response to the tight labour market and high inflation," he explained.</p> <p>"At the aggregate level, wages growth is still consistent with the inflation target, provided that productivity growth picks up.”</p> <p>The interest rate spike will add around $76 a month to the repayments on a $500,000 loan, and double that on a million-dollar 25-year mortgage.</p> <p>Someone with $500,000 owing on their home loan will see their monthly repayment increase by around $1,134 a month since the RBA started lifting rates from a record low of 0.1 per cent in May 2022.</p> <p>However, there is still the risk of another rate rise.</p> <p>"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve," Lowe warned.</p> <p><em>Image credit: Twitter</em></p>

Money & Banking

Placeholder Content Image

Pizza chain's delightfully devilish scheme lets you pay when you die

<p>A delightfully devilish pizza chain is taking the 'buy now, pay later' scheme to the next level, giving customers the chance to pay for their pizza when they die. </p> <p>HELL Pizza is inviting pizza fans to apply for the trial scheme, which involves amending their wills to have their total cost included. </p> <p>The chain has one store in Brisbane, with the rest of its stores located around New Zealand, with customers from both countries able to apply for the scheme, which involves no late fees or penalties.</p> <p>The restaurant will select 666 applicants from each country, who will be invited to sign a real amendment to their wills allowing the cost of their pizza to be collected upon death.</p> <p>According to HELL Pizza CEO Ben Cumming, pizza is one of the simple joys of life, and AfterLife Pay means diners can get their fix without having to dip into the bank account immediately.</p> <p>The scheme emerged after the business was approached by popular 'buy now, pay later' providers who wanted HELL Pizza to offer the service to its customers. </p> <p>The pizza chain's unique AfterLife Pay came as a direct response to this proposal, as a statement against “schemes trapping a growing number of Aussies in spirals of debt”, Cumming said.</p> <p>“We’re seeing a growing number of people using the schemes to buy essential items like food, and we think it’s taking it a step too far when you’ve got quick service restaurants like ours being asked to offer BNPL for what is considered a treat,” he said.</p> <p>“Especially when you consider people are falling behind in their payments and 10.5 percent of loans are in arrears."</p> <p>“AfterLife Pay is a light-hearted campaign that reinforces HELL’s stance on BNPL schemes - you can have your pizza and eat it too without any pesky late fees or penalties.”</p> <p>Applicants can apply for the scheme <a href="https://afterlife.hellpizza.au/" target="_blank" rel="noopener">online</a>, with the chain's restaurant assuring that you will you won't pay anything for your order until "you're resting six feet under". </p> <p><em>Image credits: HELL Pizza</em></p>

Food & Wine

Placeholder Content Image

Get-rich-quick schemes, pyramids and ponzis: five signs you’re being scammed

<p><a href="https://theconversation.com/profiles/bomikazi-zeka-680577">Bomikazi Ze<em>ka</em></a><em>, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a> and <a href="https://theconversation.com/profiles/abdul-latif-alhassan-1390159">Abdul Latif Alhassan</a>, <a href="https://theconversation.com/institutions/university-of-cape-town-691">University of Cape Town</a></em></p> <p>Consumers are under a lot of financial strain. The <a href="https://www.weforum.org/agenda/2022/09/cost-of-living-crisis-global-impact/">World Economic Forum</a> reports that the cost-of-living crisis is affecting people across the globe. With food and fuel prices rising, it’s becoming increasingly difficult to keep financially afloat. On top of that, salaries <a href="https://www.wsj.com/articles/workers-pay-globally-hasnt-kept-up-with-inflation-e6df92d">aren’t keeping up with inflation</a>, making it more difficult to save and build wealth.</p> <p>It’s during such times of economic difficulty and uncertainty that fraudsters lure unsuspecting consumers into “<a href="https://www.sabric.co.za/">get-rich-quick</a>” schemes, offering <a href="https://www.sabric.co.za/stay-safe/ponzi-pyramid-schemes/">an avenue to make easy money</a> by investing in a “lucrative” financial opportunity.</p> <p>Nothing beats the prospect of making easy money, and every now and again there seems to be a “get-rich-quick” scheme circulating on WhatsApp or on social media that seems legitimate. But it’s not.</p> <p>Our research interests centre on financial systems in emerging economies, and we advocate for financial inclusion and empowering marginalised communities through financial literacy and financial planning. We use our academic platform to share our expertise on finance, including common financial traps people should steer clear of.</p> <p>“Get-rich-quick” schemes are one such trap. They’re also sometimes called ponzi or pyramid schemes. The schemes are a form of <a href="https://www.lawinsider.com/dictionary/financial-fraud">financial fraud</a>. The people running them take money through deception: the misrepresentation of information and identity. They promise financial benefits that don’t exist.</p> <p>You should avoid them because, more often than not, they are bogus and fraudulent business ventures.</p> <p>There have been some massive fraud schemes over the past 30 years. In the early 1990s, <a href="https://www.independent.co.uk/news/world/africa/mmm-global-russian-ponzi-scheme-from-1990s-reborn-and-now-spreading-like-wildfire-in-africa-a7333366.html">MMM Global</a> - one of the world’s largest and most notorious ponzi schemes - defrauded up to 40 million people, who lost an estimated $10 billion. Ponzi schemes have since resurfaced in different forms in <a href="https://www.iol.co.za/weekend-argus/news/ponzi-scheme-investigated-as-some-victims-lost-as-much-as-r200-000-c3c3633c-2abb-4dd4-b668-a5ea608deb41">South Africa</a>, <a href="https://guardian.ng/business-services/nigerians-lose-over-n911b-to-ponzi-schemes-related-fraud-in-23-years/">Nigeria</a>, <a href="https://www.voazimbabwe.com/a/zimbabwe-money-pyramids-ponzi-schemes/6305100.html">Zimbabwe</a>, <a href="https://allafrica.com/stories/202105170964.html">Kenya</a>, <a href="https://doi.org/10.1108/JFC-09-2020-0177">Ghana</a> and several other African countries.</p> <p>There are five tell-tale signs of a “get-rich-quick” scheme. Watch out for them.</p> <h2>The five tell-tale signs</h2> <p><strong>Firstly</strong>, they offer exaggerated and above-market returns within a short period of time, with the promise of little to no risk.</p> <p>There are two golden rules when it comes to investing. The first is that it takes time to make money. Amassing a small fortune within a short space of time should raise questions about the scheme.</p> <p>The second rule is: the higher the risk, the higher the return. In other words, no investment is risk free or can guarantee significant returns. There is always some risk involved. An investment that promises substantial returns tends to be quite risky, which repels most people with a low appetite for risk.</p> <p><strong>Secondly</strong>, new members are constantly recruited to join the scheme.</p> <p>Typically, such schemes are sustained by relying on the investments of new members to pay existing members. Once the number of existing members exceeds new members, the scheme goes “belly-up”. At best you lose out on the returns you were promised. At worst you lose all the money you’ve invested.</p> <p>When the scheme collapses, it is almost impossible to recover the money you’ve lost because you’ve technically given it to a stranger (remember, the definition of financial fraud encompasses the misrepresentation of identity).</p> <p><strong><strong>Thirdly</strong></strong>, there is urgency to join the scheme and no clarity on how the scheme works.</p> <p>This is a classic characteristic of a “get-rich-quick” scheme. There is usually no clear answer about the nature of the scheme, what it invests in, how it generates its returns or the credentials of the organisation.</p> <p>Legitimate investments are transparent and can provide investors with all the information they need to help them decide whether to invest. Unsurprisingly, a proper check of “get-rich-quick” schemes will unmask their fraudulent nature. This is why there’s always the urgency and coercion to make an immediate financial commitment under the guise of missing a once-in-a-lifetime opportunity to get rich.</p> <p><strong>Fourthly</strong>, the scheme is not registered with or regulated by any recognised authority.</p> <p>Regulatory authorities are important because they monitor the conduct of financial service providers and protect consumers by keeping their best interests in mind. The protection provided by financial regulators also instils confidence in financial systems.</p> <p>“Get-rich-quick” schemes are not registered and operate outside the framework of regulatory bodies. This makes investors more vulnerable to loss and makes it more difficult to seek legal recourse when the loss occurs.</p> <p>Legitimate investments in South Africa are offered by authorised financial service providers and regulated by the <a href="https://www.fsca.co.za/Pages/Default.aspx">Financial Sector Conduct Authority</a>. You can search for any authorised financial service provider on the authority’s <a href="https://www.fsca.co.za/Fais/Search_FSP.htm">website</a>.</p> <p><strong>Fifthly</strong>, they use the testimonies from existing members who’ve earned big bucks to promote the scheme.</p> <p>At the initial stages, the scheme tends to pay out to those who have invested early, and these members are encouraged to share the news of their wealth (which travels fast and far) to promote the scheme.</p> <p>But this is a tactic used to create the impression that you too can earn returns in the double digits. These schemes are both unsustainable and unethical as one person gets wealthy through someone else being deceived.</p> <h2>Too good to be true</h2> <p>It’s worth repeating that if it sounds too good to be true, then it probably is.</p> <p>Wealth comes from a sound investment strategy and decisions made over time. Any promise to “get rich quick” should be treated with the cynicism it deserves. It will ultimately reveal its fraudulent nature. Recognising the signs of “get-rich-quick” schemes can save you from unnecessary financial distress.</p> <p>It’s always a good idea to do your own investigation before committing your finances into any investment. You can find more information on the various types of scams through the <a href="https://www.sabric.co.za/">South African Banking Risk Information Centre</a>’s website and report them to the <a href="https://www.safps.org.za/Home/Contact">South African Fraud Prevention Service</a>.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/205798/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a href="https://theconversation.com/profiles/bomikazi-zeka-680577">Bomikazi Zeka</a>, Assistant Professor in Finance and Financial Planning, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a> and <a href="https://theconversation.com/profiles/abdul-latif-alhassan-1390159">Abdul Latif Alhassan</a>, Associate Professor in Development Finance & Insurance, <a href="https://theconversation.com/institutions/university-of-cape-town-691">University of Cape Town</a></em></p> <p><em>Image credits: Getty Images</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/get-rich-quick-schemes-pyramids-and-ponzis-five-signs-youre-being-scammed-205798">original article</a></em>.</p>

Money & Banking

Placeholder Content Image

Super has become a taxpayer-funded inheritance scheme for the rich. Here’s how to fix it – and save billions

<p>Australia’s A$3.3 trillion superannuation system is supposed to boost people’s retirement incomes. The government says as much in its <a href="https://treasury.gov.au/sites/default/files/2023-02/c2023-361383.pdf">proposed leglislated objective</a> for superannuation. The system is supported by billions of dollars of tax breaks each year, ostensibly to that end. </p> <p>But there’s just one problem – increasingly, much of what is saved is never spent.</p> <p>Our new report, <a href="https://grattan.edu.au/report/super-savings-practical-policies-for-fairer-superannuation-and-a-stronger-budget">Super savings: Practical policies for fairer superannuation and a stronger budget</a>, points out that without an overhaul, super tax breaks are set to do little more than boost the inheritances of Australians with well-off parents. </p> <p>Super contributions and super earnings are both taxed more lightly than other income. These tax breaks cost the budget about $45 billion (2% of Australia’s gross domestic product, or GDP) each year.</p> <p>Treasury predicts that figure will hit 3% of GDP by 2060, and that the cost of super tax breaks will overtake the cost of the age pension by as soon as 2036.</p> <p>Super tax breaks are also unfair: about two-thirds go to the top 20% of earners. </p> <p>This means the tax breaks provide the biggest boost to the super accounts of high earners, who will almost all have a comfortable retirement regardless, and who tend to save the same regardless of the tax rate imposed. </p> <p>The wealthiest 10% of Australians get a bigger boost to their retirement savings from super tax breaks than poorer Australians get from the age pension.</p> <p>But much of what is saved for retirement never actually gets spent in retirement. </p> <p>Earlier research by <a href="https://grattan.edu.au/news/balancing-act/">Grattan Institute</a> and the <a href="https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-udcomplete-report.pdf">2020 Retirement Income Review</a> found that, for a variety of reasons, spending falls substantially during retirement. Retirees often end up leaving much of their nest egg untouched, bequeathing it to their children.</p> <p>This means billions of dollars in super tax breaks simply end up boosting the inheritances received by the children of well-off parents. It makes super a taxpayer-funded inheritance scheme. </p> <p>This problem is set to get worse. With the rate of compulsory superannuation legislated to rise from 10.5% of wages to 12% by 2025, future generations of retirees are set to retire with even larger nest eggs that they will never spend. </p> <p>Treasury projects that by 2059, one in every three dollars paid out of the super system will be a bequest, up from one in every five today.</p> <p>Big inheritances boost the jackpot from the birth lottery. They help richer children get richer. Among the Australians who received an inheritance over the past decade, the wealthiest fifth received on average <a href="https://grattan.edu.au/news/the-great-australian-nightmare/">three times</a> as much as the poorest fifth.</p> <p>To help reverse this, the government needs to rein in the super tax breaks.</p> <h2>How to make super fairer</h2> <p>The government’s policy, <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/superannuation-tax-breaks">announced in February</a>, of taxing the earnings on balances bigger than $3 million at 30%, instead of 15%, will help. </p> <p>But the threshold ought to be lowered to $2 million. Balances between $2 million and $3 million are very unlikely to be spent in retirement, so winding back tax breaks on earnings on balances bigger than $2 million would further wind back taxpayer-funded bequests. </p> <p>And there’s more. Currently, many wealthier Australians receive a larger tax break per dollar contributed to super than many low income earners. </p> <p>Yet low earners have more to be compensated for. Putting money into their super cuts their age pension in retirement, and they live shorter lives, meaning less time to enjoy their super in retirement.</p> <p>The pre-tax contributions of people earning more than $220,000 a year should be taxed at 35%, instead of the 30% charged to those earning more than $250,000 currently. That would still offer a 10% tax break on super contributions for high earners (given the top marginal rate of 45%) and at least a 15% break on the contributions of low and middle earners. </p> <p>And the annual pre-tax contributions cap should be lowered from $27,500 to $20,000. Contributions above this level tend to be made by people close to retirement with already-high balances.</p> <h2>Tax earnings in retirement the same as while working</h2> <p>On the earnings side, the tax-free earnings enjoyed by retirees on their first $1.7 million ($1.9 million from 1 July this year) of their super should go.</p> <p>Superannuation earnings in retirement should be taxed at 15%, the same as superannuation earnings before retirement. This would save the budget at least $5.3 billion a year, and much more in future, and make taxing super more simple.</p> <p>More than 70% of this revenue would come from the top 20% of retirees. The top 10% would pay an extra $7,000 to $7,500 a year on average, whereas the poorest half would no more than $200 more each.</p> <p>Both sides of politics say they agree that super shouldn’t be a taxpayer-funded inheritance scheme. But there’s a long way to go before that vision is reality.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/super-has-become-a-taxpayer-funded-inheritance-scheme-for-the-rich-heres-how-to-fix-it-and-save-billions-202948" target="_blank" rel="noopener">The Conversation</a>. </em></p>

Retirement Income

Placeholder Content Image

Money guru's generous home loan offer for struggling Aussies

<p>Finance guru Mark Bouris has offered to help five homeowners pay off their mortgages amid continuously rising interest rates. </p> <p>A vocal critic of the Reserve Bank of Australia’s dramatic hiking of interest rates, Bouris is determined to help struggling Aussies get ahead. </p> <p>The executive chairman of Yellow Brick Road Home Loans is lending a helping hand to homeowners hit hard by massive increases in their month mortgage payments with a generous cash injection of $12,000.</p> <p>“All Australians deserve a fair go on their home loans and right now you’re not getting one,” Mr Bouris said on Today. </p> <p>“I know many Australians are doing it tough out there right now. Through no fault of their own, homeowners are having to manage skyrocketing mortgage repayments."</p> <blockquote class="instagram-media" style="background: #FFF; border: 0; border-radius: 3px; box-shadow: 0 0 1px 0 rgba(0,0,0,0.5),0 1px 10px 0 rgba(0,0,0,0.15); margin: 1px; max-width: 540px; min-width: 326px; padding: 0; width: calc(100% - 2px);" data-instgrm-permalink="https://www.instagram.com/reel/CpjyXECgnNr/?utm_source=ig_embed&amp;utm_campaign=loading" data-instgrm-version="14"> <div style="padding: 16px;"> <div style="display: flex; flex-direction: row; align-items: center;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 40px; margin-right: 14px; width: 40px;"> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 100px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 60px;"> </div> </div> </div> <div style="padding: 19% 0;"> </div> <div style="display: block; height: 50px; margin: 0 auto 12px; width: 50px;"> </div> <div style="padding-top: 8px;"> <div style="color: #3897f0; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: 550; line-height: 18px;">View this post on Instagram</div> </div> <div style="padding: 12.5% 0;"> </div> <div style="display: flex; flex-direction: row; margin-bottom: 14px; align-items: center;"> <div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(0px) translateY(7px);"> </div> <div style="background-color: #f4f4f4; height: 12.5px; transform: rotate(-45deg) translateX(3px) translateY(1px); width: 12.5px; flex-grow: 0; margin-right: 14px; margin-left: 2px;"> </div> <div style="background-color: #f4f4f4; border-radius: 50%; height: 12.5px; width: 12.5px; transform: translateX(9px) translateY(-18px);"> </div> </div> <div style="margin-left: 8px;"> <div style="background-color: #f4f4f4; border-radius: 50%; flex-grow: 0; height: 20px; width: 20px;"> </div> <div style="width: 0; height: 0; border-top: 2px solid transparent; border-left: 6px solid #f4f4f4; border-bottom: 2px solid transparent; transform: translateX(16px) translateY(-4px) rotate(30deg);"> </div> </div> <div style="margin-left: auto;"> <div style="width: 0px; border-top: 8px solid #F4F4F4; border-right: 8px solid transparent; transform: translateY(16px);"> </div> <div style="background-color: #f4f4f4; flex-grow: 0; height: 12px; width: 16px; transform: translateY(-4px);"> </div> <div style="width: 0; height: 0; border-top: 8px solid #F4F4F4; border-left: 8px solid transparent; transform: translateY(-4px) translateX(8px);"> </div> </div> </div> <div style="display: flex; flex-direction: column; flex-grow: 1; justify-content: center; margin-bottom: 24px;"> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; margin-bottom: 6px; width: 224px;"> </div> <div style="background-color: #f4f4f4; border-radius: 4px; flex-grow: 0; height: 14px; width: 144px;"> </div> </div> <p style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; line-height: 17px; margin-bottom: 0; margin-top: 8px; overflow: hidden; padding: 8px 0 7px; text-align: center; text-overflow: ellipsis; white-space: nowrap;"><a style="color: #c9c8cd; font-family: Arial,sans-serif; font-size: 14px; font-style: normal; font-weight: normal; line-height: 17px; text-decoration: none;" href="https://www.instagram.com/reel/CpjyXECgnNr/?utm_source=ig_embed&amp;utm_campaign=loading" target="_blank" rel="noopener">A post shared by Yellow Brick Road (@ybrhomeloans)</a></p> </div> </blockquote> <p>“The Reserve Bank of Australia’s decision to increase the official cash rate for the past 10 consecutive meetings has left nearly 800,000 Australians at risk of mortgage default. At YBR Home Loans, we’re on a mission to hear the voices of those impacted most by this aggressive increase in interest rates."</p> <p>“We want to hear from you: your story, your struggles and particularly, if you’re worried about your ability to meet your mortgage repayments.”</p> <p>Mr Bouris and his team at YBR Home Loans will randomly select five lucky winners who are having trouble meeting their home loan repayments and give $12,000 to each winner “in order to help ease the strain of rapidly increasing interest rates”.</p> <p>“If you’re going to struggle to meet your mortgage repayments as you come off your fixed interest rate, or if you’re already struggling to meet your repayments, please fill out your details and outline your circumstances,” Mr Bouris said.</p> <p>Homeowners can write to Mr Bouris and Yellow Brick Road at <a href="https://ybr.com.au/fairgo" target="_blank" rel="noopener">ybr.com.au/fairgo</a> to be entered into the competition.</p> <p><em>Image credits: Instagram</em></p>

Real Estate

Our Partners