Australians have a record $1.98 trillion sitting in cash and deposits, but average term deposit returns are now below inflation.
Australians sitting on record cash hoards while waiting to buy property have been hit with an urgent warning that their savings are going backwards.
New Reserve Bank of Australia data shows average bank term deposit rates remained stuck at 3.55 per cent in May, outpaced by an inflation rate of 4.2 per cent.
For every $100,000 held in an average term deposit, savers are falling about $650 behind inflation each year before tax.
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The hit is even worse for money in the average online savings account, where a 3.05 per cent return leaves savers about $1150 behind inflation on a $100,000 balance before tax.
For property buyers, experts warn the loss could be even harsher if home prices move faster than their savings.
Property Investment Professionals of Australia chair Cate Bakos said buyers sitting on cash while waiting for the perfect time could lose their place in the market.
“We saw that happen after Covid,” Ms Bakos said.
“We saw the rate of capital growth absolutely fly, and people who sat on the sidelines waiting to see what would happen lost their place on the property ladder.
“Some buyers were priced out of suburbs they previously could have afforded to buy in.”
PIPA chair Cate Bakos warned buyers could lose their place on the property ladder while waiting with cash in the bank. Picture: Supplied.
Ms Bakos said buyers often found it difficult to act when there was uncertainty in the housing market, but waiting for the bottom could become a costly mistake.
“The difficulty is that no one rings a bell at the bottom of the market,” she said.
“It is very hard to perfectly time a transaction and be certain you are buying at the bottom.
“A lot of buyers look at price falls and think, ‘What if this continues? What if I buy now and the value drops further?’
“But I think people need to look at it with a longer-range lens.
“If you are securing the property you really want to live in, the property you will call home, does it really matter if it drops another couple of per cent in the short term, if you know you are buying at an advantageous price now?”
Experts warn property buyers sitting on deposits could be priced out if home values move faster than their savings.
Ms Bakos said a buyer’s deposit could be overtaken if they waited too long.
“If you are a property buyer and your deposit is just sitting there while prices move, there is a risk that the market can move faster than your savings,” she said.
“The perfect time is rarely obvious when you are standing in it.
“It usually only looks obvious afterwards.”
Australians held a record $1.98 trillion in cash and deposits in the December 2025 quarter, equivalent to 10.5 per cent of total household wealth.
Baseline Financial director Damian Medici said money in the bank could look safe while its real buying power was being eaten away.
Baseline Financial director Damian Medici said many Australians did not realise a stable bank balance could still mean they were losing ground.
“It means their money is effectively being eaten away,” Mr Medici said.
“If the rate they are getting on cash is below inflation, then the real value of that money is going backwards.
“It might look safe because the balance in the bank account is still there, but in terms of buying power, it is getting chewed up over time.”
Mr Medici said cash still had an important role as a household safety net, especially for families with mortgages, children and regular bills.
“Cash still has an important role. It is your safety net,” he said.
“Generally, I would say households should aim to have about six months of living expenses set aside.
“That gives you a decent buffer and a bit of breathing room if something goes wrong.”
A $100,000 balance in an average online savings account could fall about $1150 behind inflation across a year before tax.
But he said savers needed to understand why they were holding cash and how long they planned to leave it there.
“You would not give the same advice to a first-home buyer as you would to someone approaching retirement,” Mr Medici said.
“A pre-retiree may have a shorter time horizon and may need to be more careful, because they might need that money soon.
“But someone younger, say in their 20s, 30s or early 40s, generally has more time on their side.
“The key is not to sit there doing nothing without understanding the consequences. People need to get proper advice and make decisions that actually match their goals.”
Trilogy Funds head of direct property Laurence Parisi said doing nothing with cash had become a guaranteed loss in real terms.
Trilogy Funds head of direct property Laurence Parisi said the latest rate rise was unlikely to ease pressure on savers receiving low real returns from banks.
“Last month’s official rate rise is unlikely to alleviate the pain being felt by Australians, who are receiving very little on their cash investments from banks,” Mr Parisi said.
“We’re reaching a point where doing nothing with cash is no longer a defensive strategy, it’s a guaranteed loss in real terms.”
Mr Parisi said cash was still useful for households that needed quick access to money, but large balances were becoming more exposed while inflation remained elevated.
“Cash still has a role for liquidity purposes, but holding large balances is increasingly punitive as inflation is expected to remain a central feature of the economic landscape,” he said.
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