Cash rate
The Reserve Bank's official interest rate, which influences what banks charge on loans and pay on savings.
The cash rate is the interest rate on overnight loans between banks, set by the Reserve Bank of Australia. It anchors the cost of money across the economy.
The RBA moves it to manage inflation and employment. Raising it makes borrowing more expensive and cools spending; cutting it does the reverse.
Lenders are not obliged to pass changes through in full. Variable mortgage rates usually follow the direction of the cash rate but not always the exact magnitude or timing.
The cash rate also flows through to term deposits, savings accounts, business lending and the exchange rate. That breadth is why RBA decisions attract attention well beyond people with a mortgage, and why the announcement moves markets within seconds.
What 0.25% means on a mortgage
On a $600,000 loan, a quarter-point increase adds roughly $1,500 a year in interest, or about $90 a month on a typical 30-year repayment schedule.
The bit people get wrong
Savings rates tend to follow cuts quickly and rises slowly, while mortgage rates do the opposite. The asymmetry is a persistent source of complaint and a reason to review both regularly.
Common questions
How often does the RBA meet?
The board meets several times a year on a published schedule and announces its decision the same day, alongside a statement explaining the reasoning.
Does the cash rate affect fixed loans?
Not existing ones, which are locked. It influences the fixed rates offered to new borrowers, though those move on market expectations rather than the current rate.
Why do rates rise when inflation is high?
Higher rates reduce borrowing and spending, easing demand pressure on prices. It is the main lever the RBA has to bring inflation back to target.