The Reserve Bank of Australia (RBA) frequently pops up in the news, and while we know it's important, what is the RBA and how does it affect us?

The RBA is the central bank of Australia and was first established to assist the stability of the Australian currency, the maintenance of employment in Australia and the economic prosperity and welfare of the people of Australia.

Despite what its name may suggest, the RBA is not a commercial bank, rather it provides services to the government, government-related agencies and other overseas banks.

It's also responsible for regulations about card payments and other facets of payments systems in Australia, including surcharges and fees charged by merchants to consumers.

Importantly, it sets the official cash rate, which is the rate of interest the RBA charges on overnight loans to commercial banks. Banks like Auswide Bank.

So how does this affect the everyday banker? When the interest rate set by the RBA changes, it can have an impact on many aspects of our lives, including the exchange rate, supply of credit (borrowing money), and the spending habits of both businesses and households.

It's important to note that the RBA cannot directly inform the lending rate of banks. However, it has an indirect influence because it affects the affordability of credit for the banks.

Sometimes, banks can pass on the effects of the cash rate (through an increase or decrease to interest rates) to customers, but they aren't required to.

The lack of a fixed link between the RBA rate and bank home loan interest rates is partially what makes RBA rate tracker loans, like Auswide Bank's, attractive to everyday bankers.

To find out more about the RBA, visit their website.