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What does the coronavirus recession mean for my savings?

Samantha Menzies
·Contributing editor
·6-min read
Photo Of Broken Pink Piggybank With Bandage
(Source: Getty)

The widespread economic impact of the coronavirus pandemic has plunged Australia’s economy into a once-in-a-lifetime recession, recording negative economic growth for the first time in nine years, and it’s hurting your nest egg.

Australian interest rates at a record low

In times of crisis such as the coronavirus pandemic, it's typical for central banks to attempt to cut interest rates to stimulate spending with the view it will slow down any decline in the economy, a strategy also known as quantitative easing.

Low interest rates help to stimulate growth by making it cheaper to borrow money, and less favorable to save which in turn prompts both individuals and businesses to take advantage of low-cost borrowing and the opportunities to make or save money.

For the Covid-19 recession, official interest rates were cut to a record-low 0.25 per cent in March as the Covid-19 pandemic hit our economy and saw it dive into a once-in-a-lifetime recession.

With the Reserve Bank targeting 0.25 per cent for the Commonwealth government bond yield, Governor Philip Lowe is indicating that, based on the current outlook, a change in the official cash rate is unlikely before 2023.

In fact, while it's unlikely, the Reserve Bank hasn’t ruled out moving to negative interest rates like those seen in the Eurozone and Japan.

More about Recession 2020:

Aussie savings have rocketed

Interestingly, household savings are on the way up despite the coronavirus pandemic.

ABS data shows that household savings in June this year were 10 per cent higher than in February and up 31 per cent from January.

A recent Finder survey also showed the average person surveyed stashed away $793 a month in June, compared to $604 during the first month of the year as a volatile economy and fickle job market is putting pressure on personal finances.

Okay, but how does this affects my savings?

Whether you’ve been saving for a home deposit or a new car, or simply putting money aside for a rainy day, the current economic climate may be making you fret about your nest egg.

Unfortunately, while record-low interest rates are a great economic survival and recovery technique and excellent news for Aussies wanting to borrow money, it’s not good news for your personal savings because the interest rates are so low.

A year ago, the average big four bank ongoing saving rate was 1.77 per cent. Now, it is just 0.81 per cent. This is a difference of 0.96 per cent in a year, however, the cash rate has only dropped by 0.75 per cent during this time, Ratecity explains.

What this may mean for your nest egg is that you are potentially not getting as high of a return as you should.

Big four bank ongoing savings rates: Then and now



Aug 2019 Max rate

Aug 2020 max rate













Reward Saver





Progress Saver




Big four bank average




Source: Note: based on a balance of less than $50K. CBA has higher rates for higher balances. Data accurate as of 10.08.2020.

According to comparison site Finder, even online banks such as ING and UBank, which are traditionally known for their competitive savings rates, are offering just 1.50 per cent and 1.46 per cent per annum respectively on their high interest savings accounts which is a significant drop from previous figures.

With interest rates so low, is it even worth putting savings aside?

Yes, not least for financial security during a volatile and unpredictable time.

Finder also points out that aside from interest, savings accounts offer three other key benefits.

Firstly, savings accounts offer safety. This is because your deposit up to $250,000 with an Australian bank is protected under the Australian Government Guarantee Scheme.

Under the scheme, in the unlikely event that something were to happen to your bank the government would guarantee your cash deposit up to this value. It's designed to encourage Australians to keep their money with Australian banks.

Secondly, savings accounts are extremely liquid, meaning the money can be quickly and easily turned into cash as and when it’s needed. This is particularly useful during a recession when your income could suddenly drop.

By comparison, shares and property are much less liquid given there are costs on transactions and applications for things such as redrawing on a mortgage take time.

Thirdly, while a savings account isn’t attracting great rates, it’s not losing you any money. Unlike if you were to put all your money into shares or investments where you could end up making a loss.

Right, so is there anything I need to do?

Shop around to make sure you’re getting the best interest rate available.

Among the big banks, NAB currently offers 0.80 per cent per annum on its Reward Saver account, ANZ offers 0.85 per cent per annum on its Progress Saver account, and CommBank offers 0.40 per cent on its Goalsaver account, according to comparison website Mozo.

The Westpac Life account continues to lead among offerings from the major banks, giving savers interest rates of 0.85 per cent per annum so long as they make a deposit each month.

For those aged between 18 and 29, the maximum rate available jumps up to a staggering 3.00 per cent per annum, but this only applies to balances up to $30,000, and there are more monthly conditions.

For Australians who don't meet the age requirements for the Life account, there are still some worthwhile options, such as 86 400, UBank and Up which are currently offering ongoing bonus rates of 1.60 per cent per annum so long as monthly conditions are met.

Rabobank offers an introductory rate of 2.00 per cent per annum - the highest in Mozo’s database - which is available for the first 4 months before reverting to 0.55 per cent per annum. And Volt’s Savings Account comes with a base rate of 1.45 per cent per annum, which is unconditional for balances up to $245,000.

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