Interest Rates & The Reserve Bank

Why Does the Reserve Bank Raise Interest Rates? The more people spend, the more money is in the economy, which pushes down the value of the dollar and increases inflation. Increasing the official interest rate is a way of balancing this. Inflation can increase when national spending is higher, such as around Christmas when more is spent on petrol and retail expenses, or when petrol prices or household costs go up generally. Why is it important to keep inflation low? The importance of keeping inflation low is to make sure that economic growth continues. Australia has had a very strong run of economic growth, actually the longest ever recorded. The Reserve Bank’s task is to make sure that this growth is continued, avoid recession and keep employment high. The effect of Interest Rate Rises The importance of keeping inflation low is to make sure that economic growth continues. Australia has had a very strong run of economic growth, actually the longest ever recorded. The Reserve Bank’s task is to make sure that this growth is continued, avoid recession and keep employment high.   Summary If you are considering getting a loan, its worthwhile getting advice on what type of loan will suit – fixed or variable rate. If you are already paying off a home loan and are stretched to the limit, it could be worthwhile refinancing. Perhaps you can get a better deal on your loan. Just because it was once competitive, it doesn't mean it still is – so keep your options open. Your loan decision should be based on a mortgage product suited to your individual needs. Ensure that an increase in interest rates is factored into your loan so you are not left short.