Australia's Reserve Bank of Australia (RBA), was established in 1959 under the Reserve Bank Act of 1959. This bank does not function to gain profits but moreover, the RBA operates to ensure substantial activity is occurring within the economy. The RBA is able to alter the cash rate to match the needs of the economy to ensure an active economic level is being maintained. The RBA consists of three official members, the Governor of the Reserve Bank, the Deputy Governor and the Secretary to the Treasurers, the RBA makes decisions about many aspects of the economy but it's main priority is to stabilize the Australian economy, with this intention, in order to stabilize the economy the RBA must modify the cash rate. The cash rate can be defined as the interest rate financial institutions pay to borrow or charge to lend money on the money market in an overnight basis. The RBA has many roles, its function is to primarily secure the monetary management and it is the institution through which government monetary policy is enforced. The RBA modifies the cash rate in regards to the stability of the currency in Australia, the maintenance of full employment in Australia and the economic prosperity and welfare of people in Australia, However, it is usually the government who has the final say on whether a policy is to be adopted.
All in all, the cash rate is usually regulated by the forces of demand and supply. The RBA can alter the cash rate through domestic market operations (DMO) by increasing and decreasing the supply in short term money market. The DMO is known as the movements performed by the RBA to stimulate the cash rate in a short term money market. Market Operations can be referred to as a sale or purchase of second hand government securities by the Reserve Bank to the eight authorized money market dealers. The RBA can determine the cash rate by determining whether the economic activity is too low or too high and they will alter accordingly in regards to the monetary policy.
