5 January 2009

Lower interest rates not all good news
Wahroonga, New South Wales
Melody Tan/David Gibbons

The recent fall in interest rates in Australia is not good news for everyone, says Rodney Brady, chief financial officer of the Seventh-day Adventist Church in the South Pacific.

Interest income across the Adventist Church in the South Pacific is expected to decline by over $15 million over this year. This will affect all organisations of the Adventist Church in the South Pacific, including local churches, schools, aged care, conferences, missions and institutions.

In the next financial year, the Adventist Church in the South Pacific is anticipating it will have several million dollars less in interest income, a reduction which represents less than 10% of its available funds. This decrease in interest income means it will have fewer funds available to support capital projects, institutions like Avondale College, Pacific Adventist University, Adventist Media Network, and the mission field.

“The media tends to focus on homebuyers and how lower interest rates benefit them,” says Mr Brady. “However, those with savings are going to receive less income. There are many retirees who depend on interest on their savings and superannuation as their main source of income.”

Mr Brady says if church members receive less interest income, they will pay less tithe on that income.

“The Adventist Church in the South Pacific has lower risk investments that are capital secure and earn interest while waiting to be spent. Our general investment strategy has been to not put capital at risk to chase capital gains,” he says. “So while the church did not have its annual budgets exposed to the stock market downturn, it now has less investment income due to lower interest rates.”

Interest is an important source of non-tithe income for the Adventist Church in the South Pacific for capital projects and expenses that cannot be supported from tithe. While interest is not the main source of income for local churches and other church organisations, interest income is used to help provide additional funds for operating budgets or to purchase assets.

“Lower interest rates are a normal part of the economic cycle but have fallen much faster than we would have anticipated. The cost to the Adventist Church in the South Pacific's budget of its personnel is less than 15% of available funds and no changes are planned that will affect staff other than the ongoing requirement to operate as efficiently as possible,” says Mr Brady. “The anticipated affect of lower interest rates will be less funds available to distribute for special appropriations on non-recurrent expenses or capital projects and for the ongoing support of other organisations. We do not want to over-react at the moment but we do need to monitor what happens with tithe, interest rates and other income in the months ahead.”

Rodney Brady also said gross income from offerings and tithes has not historically dipped during times of recession and financial difficulty. “It appears that whilst some people pay less tithe on their reduced investment incomes, many others see financial crises as being a time to re-evaluate their values and priorities, and actually commence or increase their tithe and offering commitment to the church."

The leaders of the Adventist Church in the South Pacific remain optimistic that church members will continue to provide for the church and its mission into 2009.