Get an expert's view of what the RBA will decide each month
Every month, the Reserve Bank of Australia (RBA) board meets to decide on the official cash rate. You’ve probably seen and heard plenty of news stories over the years about the RBA’s decision to either raise or lower rates, but what does this mean for everyday Australians?
The cash rate is the interest rate set by the RBA, Australia’s central bank, for overnight loans it gives to commercial banks. Financial institutions around the country then usually follow suit and adjust their interest rates to match, with rates typically moving in increments of 0.25%.
Changes to the cash rate have a huge impact on the economy, especially in the housing market when banks alter their mortgage interest rates, so predicting what the RBA will do to the cash rate is an important role for economists.
Surveying the experts
Changes in the RBA’s cash rate can make a massive difference to the finances of everyday Australians, including the interest rate charged on your home loan and how you can boost your balance in a high interest savings account.
In fact, an accurate prediction of what the RBA will do to the cash rate ahead of time can save you a significant amount of money, which is why forecasting rate cuts and rises is a crucial job for economists.
Here at finder.com.au, we want to make it easier for you to access cash rate forecasts from some of the country’s top economists, so we gather their predictions together here in one easy-to-use survey. This survey shows what leading economists think will happen at the next rate announcement - will the cash rate rise, fall or remain unchanged - and what it will mean for ordinary Australians and the economy as a whole.
Before reaching a decision on their forecast for the cash rate, each economist assesses a number of important factors including:
- What the RBA did to the cash rate last time?
- The state of the Australian Dollar - is it rising or falling?
- What are the current national employment figures?
- What’s the current economic outlook?
- How are property prices and the overall performance of the housing sector?
- What’s the level of consumer and business confidence?
- What’s the global economic, political and market situation?
What do economists cover in a prediction?
When formulating a forecast for the future, economists will usually cover the following issues listed below.
The RBA has an established target for consumer price inflation (of between 2-3%) to encourage strong and sustainable economic growth, so inflation figures can influence an economist’s prediction. Weak inflation figures could influence the decision for a rate cut, while higher inflation could lead to an interest rate rise.
Maintaining the stability of the Australian Dollar is another monetary policy objective for the RBA, so a rise or fall in the value of the dollar on global currency markets can influence what the RBA decides to do with the cash rate. If the RBA wants the dollar to drop in value it may cut the cash rate.
Economists will look at the performance of the housing market before formulating their predictions. As a rate cut will lead to lower interest rates from banks and more people entering the housing market and driving prices up, the RBA may wish to raise the rate to bring the market back under control.
Gross Domestic Product (GDP)
Lowering the cash rate is a tool to help stimulate growth in Australia’s GDP and push growth in the economy. ‘The economic prosperity and welfare of the people of Australia’ is another key objective of the RBA’s monetary policy.
Consumer spending and confidence
Cuts to the cash rate often give Australian consumers more confidence to spend their money because they know they will have to pay less interest on their purchases. With this in mind, economists will consider consumer spending levels across the country before determining their prediction for the RBA’s next cash rate announcement.Back to top