The Reserve Bank of Australia may have only just cut the cash rate, but investors are already betting on the central bank cutting rates again next month.
According to the latest ASX 30 Day Interbank Cash Rate Futures contract, the market has priced in a 36% probability of a rate cut at the July meeting.
Whether or not the Reserve Bank makes a move at this meeting is a matter of debate, but most economists agree that one is coming in the near term.
If this happens then it's very likely to lead to the banks cutting interest rates on savings accounts and term deposits further.
In light of this, I think income investors should consider switching to one of the many high quality dividend shares on offer on the Australian share market.
Three to consider are as follows:
Australia and New Zealand Banking Group (ASX: ANZ)
Instead of using one of this bank's savings accounts or term deposits, I would consider putting the funds into its shares due to its attractive valuation and generous dividend yield. Furthermore, I'm optimistic that ANZ will be able to grow its underlying earnings per share at a modest rate over the medium term thanks to its strong capital position, share buybacks, cost cutting opportunities, and the potential rebound in the housing market. At present ANZ's shares provide a trailing fully franked 5.7% dividend yield.
Scentre Group (ASX: SCG)
Scentre Group is the real estate investment trust that owns all of the Westfield buildings in Australia and New Zealand. I believe this is arguably the highest quality portfolio of retail shopping centres in these markets and well-positioned for income growth thanks to its high occupancy rate and periodic rent increases. It currently offers a forward distribution yield of 6% and was recently rated as a buy with a $4.71 price target by Goldman Sachs.
Transurban Group (ASX: TCL)
A third dividend share to consider replacing your term deposit with is this leading toll road operator. Over the last decade Transurban has been able to grow its dividend at a solid rate thanks to increasing toll prices and growing demand for its roads in Australia and North America. Pleasingly, I expect this positive trend to continue over the next decade, especially after its recent Westconnex acquisition. At present its units provide investors with a trailing distribution yield of 4.1%.
