History of RBA Cash Rate in Australia

The Reserve Bank of Australia's (RBA) cash rate target is arguably the most important base interest rate in the nation, and in-part determines the interest rate on products such as home loans, savings, accounts, term deposits, and more. A high RBA cash rate is usually not as good news for those borrowing money as it is for those saving money, and vice versa.

As of February 2025 the cash rate target has been reduced by 25bps to 4.10%. It hadn't moved since November 2023 and is the first cut since November 2020.

The RBA board meets eight times per year to decide the cash rate, and meetings are held over two days, similar to the United States' Federal Reserve Open Market Committee (FOMC). Following the cash rate decision, the board releases a statement, which is then followed by a press conference held by the governor.

The current RBA Governor is Michele Bullock, with her term starting on 18 September 2023. The term is due to expire 17 September 2030. 

Interest Rate Movements History

Source: RBA. Only changes in the cash rate target are reflected. *Date effective - announcement made the day before.

Updated: 18 February 2025

How long were home loan rates 17%?

Many of us know - either through lived experience or older relatives crowing about it - that interest rates in the late 80s and early 90s were very high. 

When the Reserve Bank of Australia (RBA) raised the cash rate to a crippling 17% in 1989, it made homeownership for many Baby Boomers a financial nightmare. However the fact is that interest rates were only this high for a couple of short years. 

It took only three years for sky-high interest rates to go down. By 1992, rates had stabilised to about 11% and further tracked downward. As seen in the table above, the cash rate by 1994 was 5.5% and the standard variable rate was in the 8% range - this is just the standard; many customers would have received lower rates than this. 

If you had the misfortune of buying at the peak of interest rates, you were soon rewarded with lower rates, and hopefully more equity in the home, allowing you to pay it off sooner. 

Was it better to buy a house now or then?

That's the debate raging across Australia right now. High rates/low entry cost, or low(er) rates/high entry cost. It all comes down to individual circumstances. 

At the time, a $100,000 loan at a 17% interest rate would require monthly repayments of around $1,425 (or $3,692 in today’s money). With an average full-time wage of around $26,000 per year, it meant that mortgage repayments consumed over half of a single pay.

Keep in mind a higher proportion of loans were signed based on one income; women were only able to sign a mortgage in Australia without a male guarantor from 1984!

It's no question buying a home right at the peak of interest rates would have been tough. However, they also enjoyed the feeling of decreasing interest rates. An 8.75% rate in 1994, for instance, would only require $787 in monthly repayments ($1,757 in today’s money). 

A buyer in 2020 with a $1 million mortgage at 2.5% interest would have monthly repayments of around $3,950. Because of high loan balances, many younger buyers are paying more in total mortgage repayments over time, despite the lower rates.

One million dollars is a feasible mortgage, especially in Sydney, given the median dwelling value is over that. 

However, if you're already borrowing huge amounts at low interest rates, that doesn't leave much in the kitty for when rates rise, which is what happened in 2022.

Rising rates means it's hard to feel on-top of your home loan, and given the amortisation schedule, in the early days of a home loan, you're barely paying back any of the principal, meaning you're not actually building equity in the home.

To illustrate, for someone with a $700,000 loan at 6.5%, repayments are around $4,400 per month (over 25 years). In the first year they would have paid less than $8,000 towards the principal, with the bulk of that money going towards interest.

More homes are bought with two incomes nowadays, however this is a double-edged sword. Borrowing power is suddenly increased, which can help bid up the price of homes across the board, and also increase leverage further. This leaves single homebuyers out in the cold. 

In addition, if one income earner suddenly can't work - due to having a baby, injury, illness or other reason - that places huge pressure on the sole breadwinner to maintain the mortgage.

The bottom line is that it depends on individual circumstances, but on average, by most metrics it's a lot harder to enter the property market today than it was 30 or 40 years ago. 

What does the RBA cash rate actually do?

The RBA's cash rate target is Australia's base interest rate, and is the basis for which financial institutions such as banks charge on loans to other institutions. Usually there are other factors at play, but it all tends to fall back on the central bank's cash rate target.

1. Determines interest rates on financial products

As the cash rate target is a base interest rate, this determines the interest rate charged on financial products such as home loans, car loans, savings accounts, term deposits, and more. A high or increasing cash rate usually results in a higher variable home loan rate, as seen in the table above. On the flipside, a higher cash rate also tends to boost the interest rate on savings accounts and new term deposits. The opposite is true for a low or decreasing cash rate.

RBA acts as bank for the banks

The RBA acts as a bank for retail banks we're familiar with such as CommBank, ANZ, NAB and Westpac. Retail banks can park cash in what's called the Exchange Settlement Balance. This is where the banks can also transact with one another, and earn interest from the RBA, called the near-risk free rate. This is usually a reflection of the cash rate target, or the overnight rate when quantitative easing is taken into account (more on that later). A low cash rate essentially signifies to the retail banks they need to dish out money to earn interest from elsewhere, such as financial lending products, and other wholesale markets. This keeps the wheels turning in times of financial crises.

2. Controls inflation

The RBA's remit is to promote the financial stability of Australian households, and also to keep a lid on inflation. In simple terms, high inflation is simply too much money chasing too few goods. This then drives prices up. The RBA likes underlying inflation (headline inflation minus seasonal or short-term spikes) to be in the 2-3% annual band.

A major way the RBA can control inflation is to alter the cash rate. By putting it up, this takes demand out of the markets as borrowing money is now more expensive, but storing money is more attractive. In times of slow economic growth, the RBA can cut the cash rate to make money cheaper and hence stimulate the economy.

Post-Covid, inflation in Australia has been at levels not seen in more than 30 years. This is because of supply chain issues, the war in Ukraine, and adverse weather events - and an incredibly low cash rate unchanged for nearly 18 months at 0.10%.

On the other side is that many households have had lots of cash squirrelled away after the best part of two years locked down. This is reflected in the Australian Bureau of Statistics' household savings ratio, which hit near-50 year highs during Covid and came down sharply post-pandemic and as interest rate rises hit household budgets.

Why is the RBA cash rate a 'target'?

The RBA's cash rate is not set in stone - instead the central bank opts for a 'target'. This is slightly different to other central banks, such as New Zealand's, which opt for an official cash rate or OCR. This is because other RBA operations can influence the overnight rate, or what banks actually pay to each other to borrow money.

One of the largest recent operations altering the cash rate was the RBA's quantitative easing program starting in March 2020. This was the first time the RBA enacted quantitative easing, or QE. QE is the process of a central bank intervening in the secondary Australian Government Bond market. Usually institutional investors such as super funds, banks and other companies purchase government bonds, which the Federal Government issues to fund its own operations and spending goals when taxation revenue is not enough.

As the RBA essentially has the power to be a monopoly in this market, the sheer quantity of bonds purchased, eases the interest the government has to pay on its debts. This gives more money for the government to play with; at one stage the RBA was purchasing $4-5 billion per week in government bonds, and from March 2020 to February 2022 it's thought the central bank bought around $300 billion worth. The sheer amount of money flowing in the market means that the overnight rate reached close to 0%.

This in part led to gross Australian government debt of nearly a trillion dollars. This has real-world consequences. Currently the average full time Australian worker with a tax bill of $20,000 pays more than $650 of that towards repaying interest on government debt. This is expected to go higher now as interest rates push higher.

RBA cash rate recent history - a brief overview

The Reserve Bank of Australia was established in 1959. Before that, the government-owned Commonwealth Bank of Australia acted as central bank. Until 1994 interest rate decisions weren't publicly announced.

Now, the RBA gives arguably better access to its inner-workings than ever before, regularly publishing statements, media releases, commentary and other news. Recently there has been a push to publicly disclose Board members' dissenting views on interest rate decisions like the Bank of England and other central banks.

The past 30 years

Over the past 30 years or so, the cash rate has been on a downward trend, save for a few short periods of interest rate hikes - most notably in the mid to late 2000s in the run-up to the Global Financial Crisis. This reflects a wider global trend of interest rate declines. This is in part due to persistently low inflation relative to what was experienced prior to 1990.

A large part of this is due to much lower technology prices, and globalisation playing its hand in lowering manufacturing and tradeable goods' prices. For example, why would a company choose to make a shirt in Australia for $20 when a relatively free trade agreement with China could see that shirt made for $1?

Covid times

This culminated in early 2020 at the onset of the Covid pandemic, when the RBA made an unprecedented two rate cuts in March down to 0.50% and then later in the month 0.25%.

In November 2020 the RBA made a 'Melbourne Cup Cut' and lowered the cash rate to an all time low of 0.10%. There it stayed until May 2022.

Inflation started taking off in late 2021 and early 2022. Supply chain disruptions because of the Covid-19 virus, microprocessor and silicone shortages, the war in Ukraine, and some countries opting to move goods and services back on-shore has pushed up inflation.

2024 onwards

Many economists at Australia's leading financial institutions were adamant on a rate cut at some point in 2024.

However, that was simply not the case, with the RBA standing strong in December 2024, electing to hold the cash rate, citing strong employment growth.

In February 2025 the RBA board cut the cash rate to 4.10%, saying they are comfortable with the direction of inflation, and that 4.10% is still sufficiently restrictive. 

As to how deep and over what timeframe more cuts will take place, is up for debate and can change as the economic winds blow. 

Where it looks more certain, however, is that 4.35% is the peak in this current cycle.

Viktor Shvets, Macquarie Bank's head of global strategy, said central banks over the next period will yo-yo with cash rates as they toy with inflation and deflation.

"Unlike the previous 20 years, where outcomes were relatively modest … they’ll just go up and down quite rapidly and [will get] incredibly high and incredibly low, and that’s what I call the inflation-disinflation pendulum," Mr Shvets said.

Time will tell.

Read more: RBA

Harrison Astbury

Editor and Financial Analyst

Harrison is a Research Analyst and Editor at InfoChoice. He is also the Assistant Editor at sister comparison site Savings.com.au. Together with Dominic Beattie, he co-hosts the Savings Tip Jar podcast, interviewing guests from some of the most prominent financial institutions in Australia.

Prior to joining the InfoChoice Group in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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