TODAY's interest rate cut will have a devastating impact on pensioners' savings, say seniors' advocates.
A spokesman for National Seniors Australia said the interest rate cut of 0.25 per cent will all but evaporate any gain pensioners received from the federal government's decision to ease deeming rates back in July.
The historic new low of 0.75 per cent would be reflected in lower rates of return for pensioners with savings, he said
However, the federal government's upper deeming rate (which deems how much pensioners make from their savings investments) remains at 3 per cent and will be almost double the typical return a pensioner can expect on their cash savings.
The higher the deeming rate, the less pension received.
In his announcement of the rate cut Reserve Bank governor Philip Lowe said: "While the outlook for the global economy remains reasonable, the risks are tilted to the downside.
"Interest rates are very low around the world and further monetary easing is widely expected, as central banks respond to the persistent downside risks to the global economy and subdued inflation. Long-term government bond yields are around record lows in many countries, including Australia. Borrowing rates for both businesses and households are also at historically low levels. The Australian dollar is at its lowest level of recent times.
"The Australian economy expanded by 1.4 per cent over the year to the June quarter, which was a weaker-than-expected outcome."
If the government wants to inject some life into the sluggish economy, then cutting the deeming rate would act as a stimulus and help millions of pensioners who will be doing it even tougher now with this interest rate cut.
Commenting on the interest rate cut, National Seniors Australia's government affairs advisor, Craig Sullivan said: "The government trumpeted its deeming rate cut in July as a 'bonus' for pensioners. Well there is no bonus now, because returns on savings are going to be even less, yet the government still deems anyone with a balance over $51,800 to be getting a return of 3 per cent.
"I challenge anyone to find a bank willing to offer a 3 per cent return on a term deposit.
"If the government wants to inject some life into the sluggish economy, then cutting the deeming rate would act as a stimulus and help millions of pensioners who will be doing it even tougher now with this interest rate cut."
Mr Sullivan says the deeming rate should be linked to the cash rate as it was under the Hawke, Keating and Howard governments.
"Today's rate cut just shows how inconsistent, inequitable and unfair the upper deeming rate is.
"The government is balancing its budget on the backs of pensioners." he said.
National Seniors also wants the pension, deeming and tapering rates as well as Newstart set by an independent tribunal to take the politics out of the pension.