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The RBA & you
The RBA and you.
Ever wonder how the Reserve Bank of Australia’s (RBA) decisions affect you? Here are a few quick points to keep you in the know.
Questions you may have:
- What is the RBA?
- What does the RBA do?
- How does the RBA impact me in everyday life?
- Why does the RBA change interest rates?
- What is the current Official Interest Rate?
- How often do interest rates change?
- When and what will the next rate change be?
RBA Official Interest Rate Decisions
Cash Rate Target
| Effective Date | Change in cash rate (Percent %) |
New cash rate target (Percent %) |
| 1 Dec 2009 | +0.25 | 3.75 |
| 3 Nov 2009 | +0.25 | 3.50 |
| 7 Oct 2009 | +0.25 | 3.25 |
| 8 Apr 2009 | -0.25 | 3.00 |
| 4 Feb 2009 | -1.00 | 3.25 |
| 3 Dec 2008 | -1.00 | 4.25 |
| 5 Nov 2008 | -0.75 | 5.25 |
| 8 Oct 2008 | -1.00 | 6.00 |
| 3 Sep 2008 | -0.25 | 7.00 |
| 5 Mar 2008 | +0.25 | 7.25 |
What is the RBA?
The Reserve Bank of Australia (RBA) is responsible for carrying out the central banking functions for Australia and is accountable to the Australian Parliament. The RBA meets on the first Tuesday of every month except January.
What does the RBA do?
The main role of the RBA is to monitor the supply, availability and cost of money (also known as rate of interest). Together these elements are called monetary policy. The RBA monitor a range of indicators and reports such as employment and retail sales to make decisions to control inflation. The RBA looks to keep inflation at 2-3 per cent per annum. Their decision on the cost of money is called the Official Interest Rate.
How does the RBA impact me in everyday life?
Although looking after the supply and availability of money is very important, the Official Interest Rate set by the RBA generally has the most visible impact on your day-to-day life. The Official Interest Rate may affect your loan repayment or the interest you get on your savings. The Official Interest Rate is one of the considerations that Bank’s take into account when determining variable lending rates for products such as home loans and credit cards.
Why does the RBA change interest rates?
The RBA determines whether the Official Interest Rate should rise, fall or remain the same when they meet each month. This is to sustain a healthy and growing economy. The indicators they look at include:
- the current inflation rate
- the current level of unemployment
- the Australian consumer price index (CPI)
- the producer price index (PPI)
- the level of retail sales in Australian stores; and
- the state of the world economy.
As an example, when inflation is within the target rate and the economy shows signs of slowing, the RBA might reduce the Official Interest Rate to encourage spending. Or, if inflation creeps above 3%, the RBA may take action to slow the economy down by raising the Official Interest Rate if it believes inflation will persist above the band. This action encourages people to save more and spend less.
What is the current Official Interest Rate?
You can view the current rate at any time or see what’s happened in the past by visiting the RBA Cash Rate Target page.
How often do interest rates change?
The RBA meets on the first Tuesday of each month (except in January) to look at all of the data and reports on the economy. They decide if there is a need to reduce or increase the Offical Interest Rate.
Sometimes the Official Interest Rate isn’t changed for a very long time (for example not one change was made in 2004!). At other times it changes frequently which has been the case in the last 12 months.
When and what will the next rate change be?
Following their monthly meeting, the RBA issues a media release explaining their decision. Although it can be difficult to forecast what this decision might be, the St.George Chief Economist closely examines the market everyday to prepare the bank and customers for the next RBA decision.
To find out what the St.George Economics team thinks may happen, visit our Economic Outlook page.
St.George Bank – A Division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714.
