The Reserve Bank of Australia (RBA) is Australia’s central bank, which was continued in existence under, and derives its functions and powers from the Reserve Bank Act 1959. Its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes. The RBA provides certain banking services as required to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia’s gold and foreign exchange reserves.
The target ‘cash rate’ is set by the Reserve Bank of Australia and is the rate at which banks and other institutions invest funds overnight. The RBA uses the target cash rate as a monetary policy tool to influence monetary policy settings through its financial market operations. Decisions regarding the cash rate target are made by the Reserve Bank Board and explained in a media release announcing the decision at 2.30 pm after each Board meeting.