Tough times for savers
The banks have been reluctant to pass on the recent Official Cash Rate (OCR) cut to borrowers. But they have proved much keener to cut savings rates.
That is bad news for New Zealand savers, who collectively have $141 billion invested in savings accounts and term deposits.
Four banks cut their rates yesterday, including ANZ, which cut some rates by half a percent.
The banks are offering rates of just over 3 percent for one to five year term deposits. The rates for periods of between 90 days and one year are typically in the 2 percent range.
More than one bank has cut its 30-day term deposit rate to one percent (annualised).
The lower rates are particularly hard for retirees and anyone else relying on the interest they earn from their savings.
The search for higher returns is one of the factors driving the New Zealand share market higher. The local market has been hitting new highs on an almost daily basis.
Profitable companies are offering dividend yields of around 6 percent. Contrast that with what is on offer at the banks.
But after rising 75 percent in five years many companies are starting to look expensive.
The experts say it is unlikely the next five years will see the market rise by another 75 percent. So investors need to be cautious about where they put their money. Not just shares, but any investment offering the prospect of higher returns.
There is still value, but it is harder to find.
Rates look set to fall even further. Economists at ASB now think the OCR will be cut by half a percent to 1.75 by the end of the year. That is a view shared by economists at ANZ.
New Zealand rates will look low to New Zealand savers.
But they still look high compared to what is on offer in many other countries.
Canstar says New Zealand's 2.25 percent Official Cash Rate contrasts to 2 percent in Australia.
Canada's official lending rate is 0.5 percent.
In the United States the Federal Reserve hiked rates in December for the first time in a decade. The interest rate is currently at 0.50 percent, with two more rate hikes expected this year.
The United Kingdom is offering a rate of 0.5 percent.
The European Central Bank's lending rate has been cut to 0 percent.
Japan has introduced a negative interest rate of 0.1 percent.
On the other hand Brazil's official interest rate is 14.25 percent, the highest it has been since 2006. The high rates are part of a central bank effort to curb inflation.
China is sitting at 4.25 percent. India's bank rate is 6.75 percent.
Russia is sitting at 11 percent, as the nation struggles to cope with a plunging oil price.