RBA Cash Rate

The RBA "Cash Rate" Target is what people commonly refer to as the current "interest rate".

The cash rate is actually the interest rate charged on overnight loans between banks. The amount of interest a retail investor pays on a loan is equal to this rate plus a premium (which is the banks profit and typically 2.0 to 2.5%).

Variable interest rates at major banks will therefore (in most cases) move in harmony with the RBA’s official cash rate target.

The Reserve Bank of Australia’s Board sets the official cash rate target at 2:30pm (Sydney) on the first Tuesday of the month excluding January .

The market is immediately notified via a press release on the RBA's Interest Rate Decisions page.

The RBA is Australia’s central bank and it’s responsible for setting Australia’s monetary policy with the aim of keeping the inflation rate low and stable between 2-3%.

In a perfect scenario, a Central Bank will increase rates when an economy is growing to slow growth and lower rates when an economy is struggling to stimulate growth. Interest rates can therefore be considered a rough proxy for the health of an economy.

Via the cash rate, the RBA has the ability to:

● Stimulate or slow the economy (↓ interest rates = ↑ growth)
● Manipulate the Australian dollar (↓ interest rates = ↓ AUD)
● Control inflation (↓ interest rates = ↑ inflation)

In Australia, interest rates have varied significantly; from a high of 17.50%in January 1990 to the current record low 0.10%.