David McLeish, head of fixed income at Fisher Funds, said this in an interview on Radio NZ’s Nine to Noon show today, which can be listened to on its webpage here

The theory that the Reserve Bank is working on is that if people get no, or next to no interest on savings in the bank, they will likely to go out and spend their money.  But the experience in Germany has been that the lack of interest income resulted in people spending less so as to meet their savings goals.

Investment income from fixed interest for retail depositors may not be the threatened minus, but it won’t be a source of it either.  Buy property instead?  Probably not right now as house prices are tipped to fall.  Shares? Well, they’re always speculative and losses are often as much a possibility as gains.  However, there are some good buys out there right now.

A lot of retired Waikanae people who rely on interest on savings to supplement their pensions are going to find their financial situation getting tough if the Jacinda government doesn’t revive the economy.