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Interest rates are based on decisions made by the Reserve Bank of Australia (RBA) on behalf of the Federal Government. The RBA meets the first Tuesday of every month to decide whether interest rates should be changed.

The decision to change interest rates is based upon economic data available to the RBA for the proceeding quarter or reporting period.

Banks and Financial Institutions then use these decisions as a basis for setting the interest rates for their individual loan products and will usually alter interest rates a day or two after any RBA announcement.

Generally, when the economy is heading for a "downturn" the RBA reduces interest rates to stimulate economic activity. The reverse is the case in a "boom" situation and rates are increased to curb inflation.