If you relied on rolling over term deposits for income back in the 80s, you might have done quite well living off the 14% interest rates you could get on some accounts (see table F03 in the Reserve Bank web site).

Well that was all well and lovely, at least for the time of the term deposit you could reliably plan your spending for the duration of your investment. Unfortunately the party didn't last long, and interest rates soon fell. You will quickly notice when you look at the chart below that interest rates are very tricky and definitely not predictable. Far from being a sure bet, the returns from cash and bond investments fluctuate just like any other investment.

Bonds are devalued by interest rate changes, when interest rates fall bonds do very well, when they rise bonds suffer. You can offset this to a certain extent by mixing cash and bond investments together, but nonetheless it does show that changing interest rates can have a severe effect on conservative investors. (They have a severe effect on growth investors as well, since stocks and real estate often rally in response to interest rate cuts, but suffer when interest rates rise).

The chart below shows what interest rates have done in Australia for the last couple of decades. The rates are "lender" rates, so they are what you would be paying on a mortgage. Knock off a couple of percent and you'll see what rates cash management trusts and treasury bills have paid.
Australian lender rates

And just for interest's sake, here is what rates did in the USA over the same time frame. You can see why international diversification is said to be so important, it does not necessarily follow that investments in Australia will closely follow the international markets. The interest rates charts are very different, which is one reason why our stock markets have been different as well. While the Australian stock market is often said to copy the American market, economic conditions in our two countries have been so different that the comparison is often invalid. If you understand the relationship between interest rates and stock prices you might see why in the USA the markets immediately picked themselves up, dusted themselves off and began charging upwards again following the crash of 1987, yet the Australian market went into a bearish slump and we had a fairly severe recession.
American Prime interest rates