Australian banks and interest rates

Seawolf

Hi there
Will someone please point out the flaw in my argument as I can't see it really.

If I transfer money to Australia, under their system upto £600000 will be guaranteed.
So, that is an immediate benefit over British bank accounts and removes the need to split accounts which is a pain.

then, they are offering circa 6% interest which as you all know, is a lot more than what we are getting here.
This seems to be a win-win situation, so why isn't everybody taking advantage of it, or are they?
I realise there is the exchange rate to take into account, but if I wait till the pound is back to its 'usual' level of around $1.53/1GBP, then what are the risks of huge currency fluctuations between US$ and £?
Isn't the Australian economy doing quite nicely - what sorts of shocks are likely to come along in the next year?
And then again, you can, I believe, put pounds in an Ozzie bank which I presume still gets you the safety, though I'm not sure about the interest.
I look forward to you demolishing my argument.
thanks in advance:)

HappyMJ

Big risk... I'm Australian but lived here for 9 years so have been watching this all the time. 2 years ago my house was worth £150k and the exchange rate was £1=AUD$2.66 so it was worth AUD$400k. Now my house is worth £120k and the exchange rate is £1=AUD$1.66 so it is now worth AUD$200k. In 2 years I have lost 50% of what I had (but only in Aussie dollar terms). Although I still have a house here selling it now won't get me one in Australia.

The US dollar has nothing to do directly with the Aussie dollar.

Although Australian banks currently pay 6% interest it is priced into the market. What happens if interest rates go up here?...the exchange rate will go back up again. Money is attracted to high interest rates and you'll end up losing out.

Seawolf

Big risk... I'm Australian but lived here for 9 years so have been watching this all the time. 2 years ago my house was worth £150k and the exchange rate was £1=AUD$2.66 so it was worth AUD$400k. Now my house is worth £120k and the exchange rate is £1=AUD$1.66 so it is now worth AUD$200k. In 2 years I have lost 50% of what I had (but only in Aussie dollar terms). Although I still have a house here selling it now won't get me one in Australia.

Fair enough, but as I won't want to be buying a house in Oz, then this does not matter to me.

The US dollar has nothing to do directly with the Aussie dollar.Understood. I used the comparison to 'measure' the pound.

Although Australian banks currently pay 6% interest it is priced into the market. What happens if interest rates go up here?...the exchange rate will go back up again. Money is attracted to high interest rates and you'll end up losing out. Today 7:31 AM from what I've seen,interest rates in this country take a while to go up and down. I would move the money before to long.
Thanks for your comment. Good food for thought.

Biggles

Seawolf wrote: »

Fair enough, but as I won't want to be buying a house in Oz, then this does not matter to me.

Same principle applies. If you invested, say, GBP100k and the exchange rate turned against you, your AUD166k could easily become worth GBP62k.

6% won't look so hot then.

Grandmama

Also if you are a UK resident you will be liable for UK tax on all your worldwide income, in this case interest from your investment. If it was that easy to invest abroad/offshore all UK residents would be doing it.

Katykat

Couple of points here, but m info may be a bit out of date, I'm sure someone will correct me if so. I dont think you can open an account unless you are actually an Australian resident. You have to have a tax file number ( like our NI number here) Also, Aussie banks charge for their accounts. These charges can add up quite considerably. Not so easy really