Understand Australia Interest Rate - Reserve Bank of Australia

Reserve Bank of Australia

 

The Reserve Bank of Australia (RBA) is the Australian central bank. The RBA’s most important task is to set the monetary policy for Australia. The aim of this policy is to achieve low and stable inflation in the medium term. Other important responsibilities of the RBA are:

• to maintain financial stability and the stability of the Australian dollar;
• to maintain full employment;
• to contribute to the economic development and wealth of the inhabitants of Australia;
• to act as banker for the Australian government;
• to issue Australian currency;
• to manage Australia’s foreign currency reserves.

Cash rate target

 

When reference is made to the Australian interest rate this often refers to the cash rate target, also called the official cash rate (OCR) or cash rate. This is the Australian base rate. Banks pay this interest rate when they take out a loan with a maturity of 1 day from another bank. By buying or selling bonds and other securities issued by the government the RBA can influence the money supply and thus the cash rate target. A rise or fall in the cash rate often also leads to a change in the interest rates for mortgages, loans and savings.