Yong-Long Lai

Last week the Government announced:

• All bank deposits will be guaranteed, at no charge, until 28 November 2008.
• After 28 November, the first $1 million of a deposit will continue to be guaranteed, at no charge, for three years until 12 October 2011.
• After 28 November any amount over $1 million will be guaranteed only if the bank holding the funds opts into the Government’s deposit guarantee scheme.

For the majority of people who doesn’t have millions of dollar worth of deposits, this will not apply to you. However for people who do have a substantial cash portfolio you may want to read on.

After the 28th November deposits over $1 million will no longer be guaranteed by the Rudd Government unless Banks decide to pay a fee for this ‘guarantee’. What you need to do is contact your bank and find out whether they are intending to opt-in to the Government’s deposit guarantee scheme or create a guarantee of some sort through hedging/buying insurance. The banks will obviously need to pay some sort of insurance fee for this service so I suspect the interest rate will be slightly less attractive.

Another way is for you to overcome this issue is to spread your deposits over several banks. From my understanding the deposit guarantee is per depositor, per bank. I think it will be wise to go speak with somebody who are in the business of deposits and get their clarification on this (hopefully they will be able to give you a better source)

“The deposit guarantee threshold under which there is no fee is one million dollars per depositor, per bank the government said last night. The clarification came amid advice from planners and analysts to companies, councils and individuals with more than one million to spread their money around to avoid the fee.” – Source

Until next time, maybe its about time to put your cash to work? Rediscover Stock Market and Real Estate, both are looking attractive compared to 18-24 months ago. World interest rates are falling; governments are pumping in large amount of money via stimulus package.