Where to find better income as rates drop

The cash rate in Australia has had a rollercoaster few years.

After an extended period of extraordinarily low rates, post-Covid inflation saw rates shoot back up to historically normal levels. 

Now investors are faced with the opposite conundrum again. 

With multiple RBA rate cuts priced in for 2025, where should investors be looking to find more attractive fixed income opportunities? 

Betashares senior investment strategist Cameron Gleeson is anticipating three rate cuts this year. 

This will naturally have an impact on popular income investments like term deposits and even bank hybrids, which are currently yielding around 6% p.a.

But it's still a good time for Australian income investors, according to Gleeson. 

In order to address the challenges faced by investors seeking income above what they can earn in a bank account, Betashares has launched a series of defined income ETFs with a twist.

Made up of investment-grade Australian corporate bonds set to mature in a certain year, these ETFs are the first in the country that are designed to expire at a given time:

While they lack the government guarantee of a term deposit and a different risk profile, these ETFs do offer much more flexibility. You can exit the ETF at any point before maturity.

"It's really putting a lot of power in the hands of the end investor and flexibility as to how they want to manage their money," says Gleeson.