Interest rates remain an important issue for households, investors and retirees. As at July 2026, the Reserve Bank of Australia's cash rate target is 4.35%, with the next monetary policy decision scheduled for 11 August 2026. The RBA notes that the cash rate influences other interest rates throughout the economy, including lending and deposit rates.

Higher interest rates have a mixed impact. For retirees with cash, term deposits and defensive investments, higher rates can improve income returns. For borrowers, including those with home loans, investment loans or business debt, higher rates can increase repayment pressure.

For retirees, the current environment highlights the importance of balancing income certainty with long-term growth. Term deposits and cash can provide useful stability, but holding too much in cash may increase the risk that your savings do not keep pace with inflation over the long term.

For pre-retirees and wealth accumulators, higher interest rates can affect:

• Mortgage repayments.
• Investment property cash flow.
• Borrowing capacity.
• Portfolio returns.
• The attractiveness of debt reduction versus investing.

Portfolio construction implications

A sensible strategy is not about predicting future interest rate moves. It is about ensuring your financial plan can cope with a range of outcomes. This may include reviewing debt levels, maintaining an emergency cash reserve, staggering term deposits, and ensuring your investment portfolio remains aligned to your timeframe and risk profile.

For client portfolios we will generally recommend allocations to both fixed rate and floating rate bonds. This diversifies interest rate exposure to achieve strong current cash flows from floating rates, as well as retaining some portfolio protection if interest rates are cut.

Fixed rate bonds tend to act as a portfolio shock absorber when share markets fall in response to economic weakness. This can occur if central banks reduce cash rates to support a weak economy.

Important information

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. You should obtain and consider the Product Disclosure Statement relating to any product referred to in this presentation before making any decision about whether to acquire the product.

WSC Group (Aust) Pty Ltd is an authorised representative of Count Financial Limited ABN 19 001 974 625, holder of Australian financial services licence number 227232 ("Count"). Count is owned by Count Limited ABN 11 126 990 832 of GPO Box 1453, Sydney NSW 2001. Count Limited is listed on the Australian Stock Exchange. The information on this web page is not financial product advice and is provided for information only.