Look out below, term deposit holders.
The Age is reporting Nomura Australia rate strategist Andrew Ticehurst as saying "a combination of low inflation, a stubbornly high Australian dollar, and the slowdown in China will force the RBA's hand."
With the cash rate already at a record low of 2 per cent, this would be another devastating blow for people saving for retirement and those already retired.
Against all odds, and certainly against the wishes of Joe Hockey and RBA governor Glenn Stevens, the Aussie dollar has rallied to such an extent that it trades above US80 cents. The RBA would prefer the dollar to be around US75 cents or even lower.
But it could get even worse for savers, and sooner than you think.
Capital Economics economists Paul Dale and Adam Collins believe the RBA will cut interest rates to just 1.5 per cent by the end of the year.
Little option
With interest rates this low, millions of Australians have little option but to plough their savings into the share market, particularly fully franked dividend paying stocks.
Until now, the big four banks including Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank (ASX: NAB) have been the go-to stocks for many Australian share market investors.
But not for much longer.
With property prices in bubble territory, and regulatory risks weighing, the banks are suddenly not looking the no-brainer best they once were. Westpac Banking Corp (ASX: WBC) shares, for example, are down 17.5 per cent from their recent high.
The next frontier for dividend hungry ASX investors is likely to be mid-cap stocks.
Consumer finance company FlexiGroup Limited (ASX: FXL) is one such example.
Its shares jumped 5% on Friday as investors bet it would be a beneficiary of Joe Hockey's 'Have a go' 2015 federal budget. Even after the jump, at $3.66 the shares trade on a P/E of just 12 and a forecast fully franked dividend yield of 4.7 per cent.
FlexiGroup shares are up 26 per cent since I pointed out they were dirt cheap back in December last year. I own the stock. Good things come to those who wait.
Even better than that, another stock I own is Australian Pharmaceuticals Industries Ltd (ASX: API), a company tipped to Motley Fool Dividend Investor subscribers by our resident dividend expert Andrew Page.
By following Andrew's advice, I've turned a $15,000 investment in API into $30,000 in just four short months.
Try getting that sort return — a 100% gain, a $15,000 profit, — from your 'traditional' blue chip dividend stocks, like the big four banks and Telstra Corporation Ltd (ASX: TLS)!
Andrew Page runs Motley Fool Dividend Investor, our subscription-only stock picking service that focuses solely on recommending winning ASX dividend stocks.
So far so good, with Andrew's tips soundly outperforming the All Ordinaries Index, both with dividends included.
Subscriptions to Motley Fool Dividend Investor are currently available at just $99 for a full twelve months. If you'd like to jump on board the dividend stock gravy train and beat the RBA's next interest rate cut, I'd suggest there are few better investments. Click here to join now.
