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1360.0 - Measuring Australia's Economy, 2003  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2003   
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The unofficial cash market 11.00 am call was at 15.05% at June 1990. The series then experienced a sustained decline to 4.71% in October 1993. The call rate increased to around 7.50% between January 1995 and July 1996 before decreasing again to 4.74% in February 1999. Since then the call rate gradually increased to approximately 6.25% in January 2001 before declining again to be at 4.72% in June 2002.



KEY INTEREST RATES(a)
Period
Unofficial cash market,
11.00 am call rate(b)

%
Banks, business loans,
large variable

%
Bank accepted
bills - 90 day(c)

%
Commonwealth government
10-year Treasury bonds

%

ANNUAL
June 1998
5.07
8.05
5.32
5.58
June 1999
4.80
7.95
4.93
6.27
June 2000
6.02
9.30
6.23
6.16
June 2001
5.00
8.50
4.97
6.04

MONTHLY
2001–2002
July
5.00
8.50
5.04
6.08
August
5.00
8.50
4.95
5.54
September
4.78
8.30
4.55
5.52
October
4.52
8.05
4.36
5.21
November
4.50
8.05
4.28
5.61
December
4.28
7.95
4.25
6.01
January
4.25
7.85
4.26
6.01
February
4.25
7.85
4.31
5.95
March
4.25
7.85
4.46
6.32
April
4.25
7.85
4.59
6.10
May
4.44
8.10
4.84
6.20
June
4.72
8.35
5.07
5.99

(a) All data are end of period unless otherwise stated.
(b) Data are the weighted average of daily figures for the month.
(c) Data are the weighted average of the last week of the period.

Source: Reserve Bank of Australia Bulletin (RBA).


Explanatory Notes

Interest is the compensation paid to a lender for deferring expenditure and the price paid by a borrower for the use of the lender's funds.

There are different rates of interest which vary according to factors such as the amount borrowed, the period of the loan and the credit rating of the borrower. As a guide to the level of long-term interest rates, the yield (i.e. the equivalent of the interest rate) on a 10-year Treasury bond is shown. The cash market rate, prime rate and 90-day bank bill yield are examples of short-term interest rates.

The short-term money market is where banks and other large corporations lend funds that are temporarily in surplus to other financial institutions, etc. that have a temporary shortfall.

The Reserve Bank of Australia operates in the short-term money market (by borrowing and lending funds itself) in order to influence the cash rate. In turn, changes in the level of the cash rate affect other interest rates. The unofficial cash market 11.00 am call rate measures the amount of interest paid on unsecured overnight loans of cash.

Interest rates on short-term investments, e.g. 90-day bank bills, are very closely related to the cash rate. Ultimately, interest rates on bank deposits and funds placed with building societies, credit unions and the like are also related to the cash rate to varying degrees. Changes in the cost of borrowing by intermediaries flow through to their loan rates. For example, the prime rate, which indicates the amount of interest charged by banks on loans to preferred customers, tends to move with reference to the cash rate.

These interrelationships allow the Reserve Bank, through its operations in the short-term money market, to have an effect on many interest rates in the economy. This means that the Bank can influence the cost and hence the amount of borrowing and lending in the economy, with the aim of maintaining low inflation and contributing to a policy mix to achieve strong economic growth. Broadly speaking, this is what is meant by monetary policy.


Further Reading

Reserve Bank of Australia Bulletin
Contains information on interest rates for the money market, capital market, banks and other financial institutions.


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