Term deposits return to favour

22 August 2011
| By Mike Taylor |
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Term deposits, which became popular through the worst of the global financial crisis (GFC), are making a return to popularity with investors as a result of the latest market volatility.

Specialist research and intelligence firm, RFi, said investors have a tendency to transform into nervous evacuees and abandon risk investment in search of safe havens.

RFi director Alan Shields said term deposits still represented a crucial refuge for investors and consumers at times of significant instability.

However, he warned that banks should not become complacent, saying it was important they maintained competitive offerings.

Shields pointed out Reserve Bank of Australia data had shown that in the 12 months following the onset of the GFC in September 2008, the value of term deposits held in banks grew by 41 per cent to $297.96 billion.

He said in terms of income, 52 per cent of term deposit holders had an annual household income before tax of less than $70,000, while 59 per cent had a personal income before tax of less than $40,000, with consumers at the lower end of the income spectrum more likely to be risk averse.

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