Interest Rates

How Interest Rate Changes Affect You and the Economy

Interest rates play a key role in shaping Australia’s economy—and your finances. Set by the Reserve Bank of Australia (RBA), the official cash rate is a tool used to manage inflation and economic growth. When inflation rises too quickly, the RBA may increase interest rates to slow down spending. Conversely, if economic growth is sluggish, rates may be lowered to encourage borrowing and investment.

The RBA meets monthly (except January) to review the cash rate, considering factors such as employment, consumer confidence, housing trends, and global market conditions. Their decisions influence everything from mortgage repayments to savings account returns.

For savers and term deposit investors, rate increases are generally welcome news, offering higher returns. However, borrowers may feel the pinch through higher loan and credit card repayments, reducing disposable income. On the flip side, falling interest rates can ease repayment pressures and support economic growth.

Interest rate changes also affect the value of the Australian dollar, impacting exports and global investment returns.

Click here to read more about all key points mentioned above and how they may relate to you if you find yourself in this situation.