And these skinny returns may well fall further, as the banks respond to last week's 0.25 percentage point cut in official interest rates, and market expectations of more cuts to come. How long will this slump last? Interest rates on term deposit "specials" are still marginally higher than inflation. Credit:Josh Robenstone Unfortunately for savers, it's unlikely there will be a lift in returns from bank deposits any time soon. That's because returns on bank deposits are a symptom of a much wider phenomenon in the financial world – ultra-low interest rates. The Reserve Bank has played a part in this, but it's also a much bigger global story that has engulfed most big economies.

Loading Domestically, it was only late last year that the RBA thought the next move would more likely be a rate rise, but a run of weak economic data forced the central bank to change track. Economic growth is running at a five-year low, inflation is just 1.3 per cent a year, and there are signs of a softening labour market. By cutting interest rates, the RBA is hoping that cheaper debt can encourage greater consumption and confidence, and reverse some of the worrying economic trends. This month's rate cut probably won't be enough to make a big difference on its own, so a second cut later this year seems all but assured after RBA governor Philip Lowe said it was "not unreasonable to expect a lower cash rate".

The global bond markets are also pointing to rates staying lower for longer. The yield on 10-year Australian government bonds recently fell below 1.5 per cent, while in a number of countries, such as Germany, some yields have turned negative. Other 'tools' Yields have tumbled because of global pessimism about US-China trade tensions harming growth, and very low inflation around the world. All the money pumped into the financial system by central banks is also distorting the market and pushing down yields.

Given all this, futures markets are pricing in an Australian cash rate of just 0.75 per cent by the middle of next year, and discussing how the RBA might use less orthodox ways to stimulate the economy, as lower interest rates stop having much impact. ANZ chief economist David Plank says that as interest rate cuts become less effective, the RBA might start using other "tools", such as explicitly telling the market it will not raise interest rates until unemployment falls by a certain amount. That would be aimed at keeping the exchange rate down, rather than affecting variable mortgage rates. Experimental policies AMP Capital chief economist Shane Oliver says there is likely to be a growing debate about "quantitative easing" – also known as printing extra money. The basic objective of such programs is to bring down long-term government bond yields, which influence the pricing of fixed-rate mortgages.