RBA Interest Rates History and Forecast

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The Reserve Bank of Australia (or RBA for short) is the central bank of Australia. Their role in the Australian economy is to issue the Australian currency and conduct and change any of the monetary policies in Australia. One of the policies they review every year (11 times a year, to be precise) is the interest rates.

Specifically, they make decisions surrounding the official cash rate, which is the interest rate on overnight unsecured loans between Australian banks. The cash rate affects multiple interest rates in Australia. So if you’re an expat, you need to know the past trends of the RBA cash rates and their potential future to decide on a home loan.

Read on for the current Reserve Bank of Australia interest rates, the past trends, and the potential future interest rates.

RBA Interest Rates History and Forecast

What Are The Current Reserve Bank Of Australia (RBA) Interest Rates?

Currently, the Reserve Bank of Australia is fixing the cash rate at 0.10%, which means that many interest rates like housing and business interest rates are slowly lowering. 

For example, the variable housing rates are low, with the interest rate for outstanding property loans being 2.94% in Jan 2022 and the interest rate for new property loans being 2.52%. 

To understand how the cash rate affects these rates over time, in Jan 2021, the rate for outstanding property loans was 3.14%, which is a significant 0.2% drop.

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What Are The RBA Interest Rate History?

Because the cash rate target is at an all-time low of 0.10% as of March 2022, numerous interest rates gradually decrease. Here are the most important financial markets in Australia and how the downward trend affects them.

The Housing Market

The current housing rate on outstanding loans is 2.94% in Jan 2022, and the interest rate for new property loans is 2.52%. Both of these are on a steady downward trend, with the rate for outstanding loans being 3.14% in Jan 2021 (3.6% in Jan 2020) and the rate for new houses being 2.79% in Jan 2021 (3.26% in Jan 2020). 

These numbers are great news for expats because the downward trend is likely to continue.

RBA Interest Rates History and Forecast

The Business Market

Business investment is advisable for anyone wanting to start any business in Australia. Here are the interest rates for all business sizes of Australia and what kind of downward trends they are on.

  • Small Businesses: the interest rate for small businesses is 4.14% as of Feb 2022. The number is on a downward trend; the interest rate was 4.46% in Feb 2021 (0.32% drop) and 5.21% in Feb 2020 (0.75% drop). Expats can expect a smaller decline of around 0.15% in the next year.
  • Medium Businesses: the interest rate for medium businesses is 2.59% as of Feb 2022. The number is on a downward trend; the interest rate was 2.76% in Feb 2021 (0.17% drop) and 3.6% in Feb 2020 (0.84% drop). Expats can expect a much smaller drop of under 0.10% in the next year.
  • Large Businesses: the interest rate for small businesses is 1.51% as of Feb 2022. The number is on a downward trend; the interest rate was 1.6% in Feb 2021 (0.09% drop) and 2.47% in Feb 2020 (0.87% drop). Expats can expect a smaller drop of around 0.05% in the next year.

What Is The RBA Interest Rate Forecast?

Although the interest rates on the RBA are all on downward trends, the interest decrease is lower each year due to the increasing inflation target. In June 2020, the CPI was -0.3%. However, now that the global economy is improving, the CPI is 3.5%. Actual inflation is increasing due to changes in various factors affecting inflation (wage growth, devaluation, etc.).

For example, wages growth is at 2.3% as of March 2022. An important statistic for expats is the unemployment rate; the current unemployment rate is 4.2% as of March 2022. However, employment growth is 2.8% (meaning that the gap between unemployment and growth is shortening as the labour market tightens).

Most importantly, the cash rate should rise after the record low numbers, which will show a gradual increase in all interest rates.

RBA Interest Rates: Final Summary

The Australian cash rate is at 0.10%, which means that many interest rates like housing and business interest rates are slowly lowering. However, the RBA’s central forecast predicts that the cash rate and underlying inflation will rise. 

Regarding the specific interest rates, the interest rate for outstanding property loans was 2.94% in Jan 2022, and the interest rate for new property loans was 2.52%. Additionally, the interest rate for small businesses is 4.14% as of Feb 2022, the rate for medium businesses was 2.59%, and for large businesses, it was 1.51%.

It’s important to mention for expats that the rates will slowly start to increase if the prediction of the cash rate increasing is correct. Therefore, it’s essential to check the cash rate to see how it will affect interest rates.

RBA Interest Rates History and Forecast

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RBA Interest Rates: Frequently Asked Questions

What Role Does The RBA Serve In Regards To Interest Rates?

The RBA affects the interest rates in Australia when they examine the Australian cash rate. Since Feb 2021, the cash rate has been 0.10%, which means that the interest rates have decreased gradually. 

For example, the interest rate for outstanding property loans was 2.94% in Jan 2022; this is on a downward trend, with the rate being 3.14% in Jan 2021 and 3.6% in Jan 2020.

How Many RBA Meetings Are There In A Year, And What Do They Discuss?

The RBA holds their meetings eleven times a year; they meet on the first Tuesday of every month of the year (except January).

They primarily discuss and set the Australian cash rate, which dictates all interest rates (housing interest rates, business interest rates, etc.).

What Reasons Are There For The RBA To Increase Interest Rates?

Inflation can increase in Australia for several reasons. The main reason why the RBA might raise interest rates is that inflation can increase. The inflation in Australia can increase for the following reasons:

  • A rise in economic growth in Australia; business profits rising, for example.
  • A rise in employees’ wages. 
  • High customer demand for certain goods.

Will The RBA Increase The Interest Rates In 2022?

There is a likelihood that the RBA will increase the Australian cash rate in 2022; this is because inflation will likely increase in 2022 due to demand for products and increased economic growth. 

The RBA will hold a meeting every first Tuesday of every month (except January) to determine the cash rate, so keep an eye on their website to check if it increases.

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