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Date Published : Monday, February 11, 2008
With all the talk of rising interest rates affecting savings accounts and home loans, many people throughout Australia may not fully understand what the decisions made by the Reserve Bank actually mean.
Recently, the Reserve Bank of Australia (RBA) increased interest rates to a 12-year high, a decision which affects the home loans, personal loans and savings accounts of every Australian.
The main responsibility of the RBA is to formulate and implement monetary policy, as laid out in the Reserve Bank Act. The RBA has a duty to ensure that its powers are used solely to advantage the people of Australia by positively contributing to the stability of the currency of Australia; the maintenance of full employment across the country and the economic prosperity and welfare of the people of Australia.
Official interest rates are dependant upon how the economy is functioning at any given time. The RBA holds monthly meetings of the board to determine whether the cash rate should rise, fall or remain stable.
Recently, the continuing effects of the global credit crunch have impacted largely on the RBA's decision.
Once decided, the interest rates directly affect the amount banks and other financial institutions charge for home loans and other services, with the decision of the RBA being passed on to the consumer via the banks.
Rates rise and fall and the decision of the RBA does, in some way, affect every person in the country. There is no avoiding it, it will affect you.
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