On Tuesday, 1st October 2019, the Reserve Bank of Australia cut the cash rate to 0.75% in order to stimulate the economy. Their objective was to reduce the unemployment rate to 4.5% and to increase wages. Over dinner that night, my daughter Kate quizzed me and Frank about how that worked. It turns out that it is not as obvious as Dr. Lowe suggests.
I see that the Reserve Bank has dropped the cash rate to 0.75%. What is the cash rate?
It is the rate that the Reserve Bank charges the banks for overnight loans.
It is the basis on which other interest rates are set. For instance, if the ra...