The Reserve Bank of Australia (RBA) is Australia's central bank. It was founded in 1960 under the Reserve Bank Act 1959. The RBA is governed by a Board of Directors with the Governor at its head. These positions are appointed by the Australian Government. On the 14th of July 2023, Michele Bullock was appointed governor, replacing Philip Low. The Board is responsible for setting the RBA's monetary policy and overseeing its operations. The RBA has its headquarters in Sydney, but it also has offices in Melbourne, Brisbane, and Perth.
What does the RBA do?
The RBA's explicit functions are laid out in the Reserve Bank Act 1959, in Sections 10(2) and 11(1):
'It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
(a) the stability of the currency of Australia;
(b) the maintenance of full employment in Australia; and
(c) the economic prosperity and welfare of the people of Australia."
What is the Cash Rate?
A primary metric the RBA uses to navigate the above intentions is by adjustment of the cash rate. The cash rate is a value set by the RBA which represents the interest for banks and lenders to pay on borrowed funds. Australian banks are not obliged to follow the RBA cash rate but this figure is considered alongside other factors when banks set their own interest rates.
The cash rate had been in decline since November of 2011, with the last change in this continual decline seen in November of 2020, dropping from 0.25% to 0.1%. In May of 2022, the RBA increased the cash rate to 0.35%, and increases have been seen every month since, with the exception of April of 2023.