Reserve Bank of Australia: What it means for you.


Why you should know about the Reserve Bank of Australia

The Reserve Bank of Australia (RBA) is a State owned banking institution established in 1960. It is the government body responsible for issuing banknotes.

The RBA provides a range of different services to the Commonwealth Government and other central banks official bodies. The specific duties of the RBA are enshrined in the Reserve Bank Act 1959. Its three key responsibilities are to provide the stability of the currency, the maintenance of employment and the economic prosperity and welfare of the people of Australia. The RBA fulfils these responsibilities by controlling inflation through its monetary policy. It provides banks registry services to government agencies.

There is hardly a conversation on the topic of interest rates without any mention of the Reserve Bank of Australia. Australian homebuyers are subconsciously aware that their own mortgage repayments are unavoidably affected by change ups in the Reserve Bank of Australia’s official interest rate, which are announced on the first Tuesday of every month.

This is because fluctuations in official interest rates are generally passed down from the commercial lender to the borrower.

Basically if the RBA’s interest rates go up, the Australian homebuyer will pay more on their mortgages. The same applies to other loan products such as credit cards, personal loans and car loans.

However at the same time, the interest you earn on your term deposits and other types of savings accounts will also go up.

If on the other hand the RBA lowers interest rates, then the amount of interest banks would charge you would be much lower. This has already occurred twice this year and RBA’s current interest rate stands at an all time low of 2.50% which means that now is a great time to be getting your first home loan if you don’t already have one or for picking up an investment property if you do.

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