Search: Cash Rate

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RBA Glossary definition for Cash Rate

Cash Rate – The interest rate which banks pay to borrow funds from other banks in the money market on an overnight basis. The cash rate is the Reserve Bank of Australia's operational target for the implementation of monetary policy. It is also an important financial benchmark in the Australian financial markets. It is used as the reference rate for Australian dollar Overnight Indexed Swaps (OIS) and the ASX 30 Day Interbank Cash Rate Futures. The Reserve Bank of Australia is the administrator of the cash rate. The cash rate is calculated as the weighted average interest rate on overnight unsecured loans between banks settled in the Reserve Bank Information and Transfer System (RITS). The Cash Rate is also known by the acronym AONIA in financial markets.

Search Results

The Household Cash Flow Channel of Monetary Policy

1 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
First, changes in the cash rate are transmitted to changes in the lending and deposit rates faced by households. ... This paper focuses on the latter two stages; other recent publications discuss how changes in the cash rate are transmitted to the
https://www.rba.gov.au/publications/rdp/2016/2016-12/full.html

A Closer Look at the Borrower Cash Flow Channel

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
If the borrower cash flow channel exists, the cash flows and spending of variable-rate borrowers should increase (decrease) relative to fixed-rate borrowers when interest rates fall (rise). ... In particular, interest rate increases should have a larger
https://www.rba.gov.au/publications/rdp/2016/2016-12/closer-look-at-the-borrower-cash-flow-channel.html

The Household Cash Flow Channel of Monetary Policy

16 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
MB. consumption, debt, households, housing, income and wealth, monetary policy. We explore whether changes in interest rates affect household consumption by changing the amount of cash that households have to spend – ... Based on a panel of Australian
https://www.rba.gov.au/publications/rdp/2016/2016-12.html

Introduction

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
First, changes in the cash rate are transmitted to changes in the lending and deposit rates faced by households. ... This paper focuses on the latter two stages; other recent publications discuss how changes in the cash rate are transmitted to the
https://www.rba.gov.au/publications/rdp/2016/2016-12/introduction.html

Data

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
As interest rates fall, this should lead to lower required repayments and higher cash flow for households with variable-rate debt relative to those with fixed-rate debt. ... This suggests that lower interest rates will boost interest-sensitive cash flows,
https://www.rba.gov.au/publications/rdp/2016/2016-12/data.html

Conclusion

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
This implies that lower interest rates increase household cash flows, and spending in aggregate, via the cash flow channel. ... This is within the range of estimates produced by macroeconomic models that examine how changes in the cash rate affect
https://www.rba.gov.au/publications/rdp/2016/2016-12/conclusion.html

References

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
Mulligan M (2015), ‘Reserve Bank of Australia Cuts Official Cash Rate to Record Low 2% at May Meeting’, The Sydney Morning Herald online, 5 May, viewed June 2015. ... Available at
https://www.rba.gov.au/publications/rdp/2016/2016-12/references.html

Stylised Facts

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
To set the scene, it is useful to briefly consider how interest rates, cash flows and household spending evolved in Australia through this period. ... This cyclical variation in interest rates, cash flows and spending will be important in pinning down
https://www.rba.gov.au/publications/rdp/2016/2016-12/stylised-facts.html

Quantifying the Aggregate Cash Flow Channel

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
100. 100. Change in cash flows ($). 1,946. 396. 1,850. 45. ... Sources: Authors' calculations; HILDA Survey Release 14.0. A 100 basis point reduction in interest rates would be associated with an average increase in interest-sensitive cash flows per
https://www.rba.gov.au/publications/rdp/2016/2016-12/quantifying-the-aggregate-cash-flow-channel.html

The Sensitivity of Household Spending to Cash Flows

23 Dec 2016 RDP 2016-12
Gianni La Cava, Helen Hughson and Greg Kaplan
But, more importantly, the cash flow channel requires that the effect of interest rate changes on spending should come through the income flows on interest-earning liquid assets and variable-rate ... Finally, we trim outliers based on the top and bottom
https://www.rba.gov.au/publications/rdp/2016/2016-12/sensitivity-of-household-spending-to-cash-flows.html