How the RBA Cash Rate Works
The Reserve Bank of Australia (RBA) sets the cash rate, which is the interest rate on overnight loans between banks, at eight scheduled meetings each year. This rate has a direct impact on your mortgage payments. At each meeting, the RBA Board looks at inflation, employment numbers, and global economic trends before deciding whether to raise, lower, or keep the rate the same. Right now, the cash rate is 4.10%. This is the main way the RBA manages inflation and supports economic growth. Knowing how this process works can help you predict rate changes and make better borrowing choices.
What Is the RBA Cash Rate?
The RBA cash rate is the interest rate that banks charge each other for overnight loans. Set by the Reserve Bank of Australia, it works as the benchmark for all interest rates across the economy.
When you take out a variable rate home loan, your interest rate is usually the cash rate plus your lender's margin. For example, if the cash rate is 4.10% and your bank adds a 2% margin, your mortgage rate would be approximately 6.10%.
The RBA uses the cash rate as its main monetary policy tool. Raising the rate increases borrowing costs, which slows spending and reduces inflation. Lowering the rate encourages borrowing and stimulates economic activity.
The RBA Board meets eight times per year to review economic conditions and decide whether to adjust the cash rate.
How Does the RBA Board Make Its Decision?
The RBA Board is made up of nine people: the Governor, Deputy Governor, Secretary to the Treasury, and six independent members chosen by the Treasurer. With backgrounds in economics, finance, and business, the Board brings a wide range of real-world experience to its decisions.
Since 2024, the Board has gathered eight times a year—about every six weeks—to consider how the economy is tracking and what needs to be done. Their meetings follow a simple, consistent routine:
Before the meeting: RBA staff put together easy-to-understand reports on things like inflation, jobs, global markets, household spending, and how money is flowing through the country.
During the meeting: Board members talk through what’s happening in the economy, weigh up different risks, and check if their current approach is helping keep prices stable, people employed, and the country prosperous.
The decision: After all the discussion, the Board votes on whether to lift, lower, or leave the cash rate as it is. The outcome is announced at 2:30 PM Sydney time that day.
After the meeting: The Governor shares a statement explaining why the Board made its decision. Two weeks later, detailed minutes are published so everyone can see what was discussed and what influenced the Board’s thinking.
The RBA aims to keep inflation between 2% and 3% over time. If prices rise too quickly, the Board usually responds by raising rates. If inflation drops too low, rate cuts become more likely to give the economy a boost.
RBA Meeting Schedule 2026
The RBA Board announces its interest rate decisions at 2:30 PM Sydney time on the following dates:
Note: Decisions are typically announced at 2:30 PM AEDT/AEST. Meeting minutes are published two weeks after each decision.
RBA cash rate meeting schedule and decisions 2025
What Happens When the RBA Changes the Rate?
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When the RBA announces its decision, the effects ripple through the entire financial system. Here’s what each scenario means for borrowers and savers.
When the RBA Raises the Cash Rate
A rate hike increases borrowing costs across the economy. Banks usually pass on the full increase to variable rate mortgages within days, sometimes adding a small margin to protect their profitability.
For a $600,000 mortgage, a 0.25% increase adds about $95 to the monthly repayment. The RBA raises rates to control inflation by discouraging spending and encouraging saving. Fixed rates may also rise as lenders anticipate further increases.
increases.
When the RBA Cuts the Cash Rate
A rate cut lowers borrowing costs, though banks may not pass on the full reduction. Competition and funding pressures determine how much relief borrowers receive.
Lower rates aim to stimulate the economy by making borrowing more affordable and saving less appealing. Borrowers can use this opportunity to reduce repayments or maintain current payments to pay off loans faster.
When the RBA Holds the Cash Rate
A hold decision indicates the RBA considers the current rate suitable for economic conditions. It signals no immediate need to slow or stimulate the economy.
For borrowers, a hold provides payment stability. However, banks may still adjust rates independently based on their funding costs. A hold often suggests the RBA is awaiting further data before making its next decision.
RBA Cash Rate vs Mortgage Rate
The RBA cash rate helps set the baseline for your mortgage, but your lender's rate includes extra costs unique to each bank.
How Your Mortgage Rate Is Built
This gap is why you typically pay 1.5% to 2.5% above the cash rate. Banks don't always pass on RBA changes in full because their other costs may move independently.
Online lenders with lower costs often offer rates closer to the cash rate than banks with branches.
