When the Reserve Bank of Australia (RBA) moves interest rates, you'll probably hear about it before we've had a chance to update our own rates.
And if you're a home loan customer watching that number tick up - or a saver wondering why your rate hasn't moved - it's natural to ask: does the bank actually have to do this?
It's a fair question. Here's how it actually works.
What is the RBA?
The RBA is Australia's central bank. Unlike Bank Australia or any other bank you'd walk into, the RBA doesn't offer accounts or home loans to the public. Its job is to look after the health of the broader economy - keeping prices stable, supporting employment, and making sure money flows through the economy.
To do that, it has one main lever: the cash rate.
What is the cash rate?
The cash rate is the interest rate banks charge each other for overnight loans. The RBA's board meets eight times a year to review it, and the decision makes the news every time.
(Wondering why the government can't just create more money instead? We explain that here.)
It might sound abstract, but the cash rate flows through to almost everything in the economy. When the RBA wants to slow spending and ease inflation, it raises the cash rate. When it wants to encourage borrowing and stimulate growth, it cuts it.
Think of it like a dial that turns the cost of money up or down across the whole economy.
So does your rate change automatically when the RBA moves?
Not automatically - but usually yes, and here's why.
We don't borrow directly from the RBA. Our funding comes primarily from customer deposits, with the remainder sourced from wholesale investors and financial markets.
The cost of that wholesale funding is closely linked to the cash rate.
When the cash rate changes, it flows through to the rates banks pay for different sources of funding - though not always by the same amount or at the same speed.
When our funding costs rise, we need to adjust lending rates to cover them.
When they fall, we can pass that relief on to borrowers.
Why don't savings rates always move at the same time?
This is the question we get most often, and it's a fair one.
Deposit rates are less directly tied to the cash rate than lending rates are, and changes tend to take more time to flow through.
Banks have discretion in how they set deposit rates, and other factors play a role too - including competition between banks to attract deposits.
That means savings rates sometimes move more slowly, or by a different amount, than home loan rates.
We're committed to passing on rate movements to savers as well as borrowers, and our current rates are always published on our website.
What does "we are still reviewing deposit rates" mean?
When we say we're still reviewing deposit rates, it means a decision hasn't been made yet.
Following an RBA announcement, we carefully consider the right balance for all our customers - borrowers and savers alike - alongside the long-term sustainability of the bank.
We'll always confirm our deposit rates with customers as soon as that decision is made.
Is it just greed?
It's a reasonable thing to wonder - and for some banks, profit pressure is genuinely part of the picture.
Shareholder-owned banks have an obligation to maximise returns for investors, which can create an incentive to move lending rates up quickly and savings rates up slowly.
Bank Australia works differently. We're customer-owned, which means we don't have external shareholders to pay.
Our profits stay within the bank, to benefit customers and fund the work we care about.
Rate decisions are about covering our costs and keeping the bank sustainable - not extracting margin.
Why is there sometimes a gap between the RBA announcement and when our rates change?
When the RBA announces a change, it doesn't take effect for us immediately. We need to update our systems, work through the operational detail, and communicate clearly with customers before any change comes into effect.
We'll always let you know as soon as a change is confirmed.
Talk to us about your home loan or see our savings account current rates.
Disclaimer: The information provided is general information and is an opinion only. We cannot guarantee its accuracy. It is not advice. You should not rely on it to make decisions. If you need specific advice on your circumstances or finances you should speak to an expert. You might need legal or accounting or other specialist advice. It depends on your personal circumstances. The information provided about Bank Australia is true and correct as at the date of publication.
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