The Reserve Bank of Australia and you

The Reserve Bank of Australia (RBA) carries out the central banking function for Australia and is accountable to the Australian Parliament. The RBA meets the first Tuesday of every month other than January to make a decision on interest rates.

The main role of the RBA is to monitor the supply, availability and cost of money. Together these elements comprise monetary policy. The RBA monitors a range of indicators and reports such as employment and retail sales to make decisions to control inflation. The RBA aims to keep inflation at 2-3 per cent per annum. Their decision on the cost of money is called the Official Interest Rate.

The Official Interest Rate impacts your day-to-day life. It is one of the major considerations that Banks take into account when determining variable lending rates for products such as home loans and credit cards.

The RBA’s Official Interest Rate will affect your loan repayment or the interest you get on your savings if the Bank increases or decreases interest rates in line with RBA rate movements.

The current Official Interest Rate

You can view the current rate at any time or see what’s happened in the past at the RBA Cash Rate Target page.

Why does the RBA change interest rates?

To sustain a healthy and growing economy, the RBA determines whether the Official Interest Rate should rise, fall or remain the same each month. Rates may change frequently or infrequently, depending on economic indicators. 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
• 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.

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 BankSA Economics team closely examines the market everyday to prepare the bank and customers for the next RBA decision.

You can see an Economic Outlook outlining our BankSA Economics team’s view on interest rate movements.

Want more information about your home loan interest rate?

Check our current interest rates now. You can also see the rate that applies to your loan using Internet Banking

If you need more help with any aspect of buying a property, please speak to one of our home loan experts on 13 13 76.