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The US Reserve Bank currently has a target cash rate of 0-0.25%, whereas the RBA has it set to 4.25%. Correspondingly, the interest rates on bank bonds and savings accounts are much lower in the US than Australia.

This difference is also one of the reasons for the high value of the Australian dollar compared to the USD.

While it might seem obvious that the OP should just open a foreign savings account, the practical hassles associated with that and the risk of loss due to foreign exchange probably make it less worthwhile than investing in companies that have some aspect of their growth tied to the Australian economy.

As a tangential note, investing in Australian index funds (as I do) is probably not a totally wise move. It's a massively concentrated market.

Just 10 companies (the 4 big banks, the 3 biggest miners, Wesfarmers, Woolworths, Telstra) form the majority of the capitalisation of ASX indices.

So the ASX is mostly those big companies, but what about the other index funds, such as the small caps?

That and I speculate that investing in Australian index funds would be similar to investing in China more directly, given how tightly coupled the economies seem to be getting.

> So the ASX is mostly those big companies, but what about the other index funds, such as the small caps?

If you're prepared for the low liquidity and high risk, be my guest.

> That and I speculate that investing in Australian index funds would be similar to investing in China more directly, given how tightly coupled the economies seem to be getting.

It is if you invest in Rio Tinto and BHP. The main tradeoff is that the Australian market is regulated by officials are probably less likely to be corrupt. Plus, if you're not Australian, a different currency risk profile.

Some people do the Australian investment trade quite well. It used to be done mostly by Japanese investors, who borrowed money in Japan at low Japanese interest rates (~0.5%) and then bought US or Australian bonds at ~5%.

Here's a 2006 article that touches on it: http://www.theglobalguru.com/article.php?id=104&offer=GU...

The biggest problem is that you are at the mercy of foreign exchange rate variations, and picking them makes picking the stock market seem simple.

In India, the rates are around 8-9% on Savings accounts.