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What does the Reserve Bank do?

On the first Tuesday of every month, the Reserve Bank of Australia (RBA) meets to set the cash rate.

But what is the cash rate, and what exactly does the RBA do?

The RBA is the government-owned, but independent central financial authority in Australia.

One of the RBA’s jobs is to set the official cash rate in order to stimulate, but not overheat the economy and keep inflation under control.

Commercial banks set their rates for everything from their home loans to their term deposits based on the cash rate.

A high cash rate places extra repayment pressure on mortgage holders through higher interest payments.

A low cash rate means low home loan rates, which is good for mortgage borrowers but bad for investors, savers and retirees. The cash rate in Australia is currently sitting at 1.50 percent, which is an all-time low.

2 Comments

  1. Dividends Down Under Dividends Down Under July 7, 2017

    A Youtube video! I did not expect that! You are very brave to venture into the world of youtube/video from blogging – great job too, you presented it very clearly. Feels like I know Miss Money Box a little better after seeing your face and hearing you talk.

    Mrs DDU

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