When interest rates rise or fall, it’s the Reserve Bank that decides, not the Treasurer. Here’s who makes those decisions, how they make them, and why politicians are kept at arm’s length.
The Reserve Bank of Australia is the country’s central bank. Its most visible job is setting the cash rate, the interest rate that influences what banks charge on mortgages and other loans, and pay on savings.
Who decides
Since March 2025, interest rate decisions have been made by a new Monetary Policy Board.
It’s chaired by the RBA Governor, Michele Bullock, and includes the Deputy Governor, the Secretary of the Treasury, and six external members appointed by the Government for their expertise in economics and related fields.
A separate Governance Board oversees the running of the RBA itself.
The change followed an independent review of the RBA released in 2023, which found decisions should be made by a board with more monetary policy expertise.
How decisions are made
The Monetary Policy Board meets eight times a year, over two days. It considers detailed analysis from RBA staff on inflation, jobs, wages, spending, the housing market and the global economy.
After each meeting, it publishes a statement explaining its decision, and the Governor holds a media conference. Detailed minutes are released a few weeks later. Since 2025, the RBA has also published a statement showing the votes of the board as a whole, without naming individual members.
Four times a year, the RBA publishes a Statement on Monetary Policy, with its forecasts for the economy.
The goals
The RBA’s goals are price stability and full employment. In practice, it aims to keep inflation between 2 and 3% a year, targeting the middle of that range.
When inflation is too high, the RBA can raise rates to slow spending. When the economy is weak, it can cut rates to encourage borrowing and spending.
Why it’s independent
The Government sets the RBA’s overall goals, but the RBA decides how to achieve them without political interference.
The idea is that politicians may be tempted to keep rates low before an election, even if that would fuel inflation. An independent central bank can make unpopular decisions in the long-term interests of the economy.
Most advanced economies have independent central banks. Research suggests independence helps keep inflation lower and more stable, because people trust the bank to act.
The Treasurer can, in rare circumstances, overrule the RBA, but that power has never been used.
Accountability
The Governor appears regularly before parliamentary committees to explain the RBA’s decisions, and the RBA publishes extensive research and forecasts.
Politicians do sometimes criticise its decisions, especially when rates rise, but the RBA’s independence has had broad support from both major parties for decades.
