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Australia’s ageing population will cause interest rates to be “lower for longer”, according to one investment analyst.
Jason Kim, from investment management company Tyndall AM, told a financial advice luncheon last week that Australia is set to follow the same path as the Japanese.
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Mr Kim said population data show that 25 per cent of Japanese are now aged over 65 – and that the demographic shift had changed the way Japanese invest.
He added that the share of Australians aged 65 and over is set to increase from its current proportion of 15 per cent of the population to 27 per cent by 2050, according to population projections.
Demography suggests that interest rates will generally fall between 4 per cent and 6 per cent, he said.
Mr Kim said the key issue would be the number of Australians that would be in the 20-34 years cohort – which borrows money for homes and cars – and those in the 40-49 cohort – which effectively loans out the money.
“In the ‘70s and ‘80s, when the baby boomers came of age and started buying their own homes and buying their cars, interest rates were quite elevated for some time,” Mr Kim said.
“Now those baby boomers are ageing and moving into the older cohorts, having largely paid off their mortgage and saving for retirement,” he said.
“But there haven’t been enough kids born prior to that to move into that 20-34 cohort, and what it suggests here is that interest rates will stay lower for longer because of this demographic shift.”
