Savings not just debt in focus as interest rates tumble

The RBNZ cut the OCR by 50 basis points Wednesday while signalling a further cut in February, prompting major banks to lower both mortgage and term deposit rates further.

Milford Asset Management’s head of KiwiSaver and retail Murray Harris expected to see the flow of savings out of term deposits and into managed funds continue as rates slipped lower.

“Certainly we’ve seen quite a significant increase of flows into our cash and our low risk funds and we're just assuming that's money that's coming from term deposits, which was it a year ago? You were getting six and a half percent. Now you're getting four and a half.”

While savers were unlikely to want to lock-up their rainy day funds in KiwiSaver, lower interest rates did have benefits for scheme members’ balances, he said.