Last month's interest rate cut appears to have done little for business confidence which has since fallen to its lowest level since before the 2013 Federal election, according to the latest National Australia Bank Ltd. survey.
In fact, the bank's survey for February found that pessimists almost outnumbered optimists with NAB's chief economist, Alan Oster, even predicting the jobless rate would surge to 6.7% this year.
The result indicates that February's single interest rate cut was not enough to spur corporate confidence and may have instead highlighted the significance of the issues facing the economy, ultimately reducing confidence. It's also likely that political uncertainty is weighing on the mood of businesses which is a blow for the Coalition, which promised to restore confidence when it was elected 18 months ago.
Although the RBA chose to leave interest rates unchanged when it met on Tuesday last week, it could certainly move to lower them in the coming months, most likely in May. Some economists have even tipped another two cuts before the end of the year which could take our official cash rate to just 1.75%.
What does that mean for you?
Clearly, declining interest rates are not a good sign for the economy in that it shows that it needs stimulus to restore activity. It's also bad news for most retirees and net savers whose living standards decrease because they aren't earning as much interest on their savings.
As unfortunate as that may be, there are ways you can still profit. In times of low interest rates, investors typically turn to high-yield dividend stocks as a way to make superior returns. That has certainly been the case in recent years with shares of the big four banks and Telstra Corporation Ltd (ASX: TLS) having surged in price.
Right now however, companies like Woolworths Limited (ASX: WOW) and Coca-Cola Amatil Ltd (ASX: CCL) are looking far more appealing. The pair are trading at reasonable prices and offer dividend yields of 4.7% and 4% respectively. Woolworths' dividend is fully franked, while Coca-Cola Amatil's is franked to 75%.
