Understanding Australia's Cash Rate and Its Impact on Interest Rates, Loans, and the AUD/KRW Exchange Rate

Australia's economic landscape is significantly influenced by the Reserve Bank of Australia's (RBA) cash rate, which serves as the benchmark for interest rates across the economy.
The RBA meets 11 times a year, typically on the first Tuesday of each month except January, to review and decide on monetary policy settings, including the cash rate.

At its meeting today, the Board decided to leave the cash rate target unchanged at 4.10% and the interest rate paid on Exchange Settlement balances at 4%, a decision influenced by global trade uncertainties and domestic economic conditions despite inflation moderating. 

The Cash Rate's Influence on Interest Rates and Loans

The cash rate directly affects various interest rates, including those for home loans and savings accounts.

When the RBA adjusts the cash rate, financial institutions like banks typically follow suit by altering their lending and deposit rates.
For instance, a reduction in the cash rate can lead to lower mortgage interest rates, decreasing monthly repayments for borrowers. Conversely, an increase in the cash rate may result in higher borrowing costs.


​Impact on the AUD/KRW Exchange Rate

Interest rates play a pivotal role in determining exchange rates.
Higher interest rates in Australia can attract foreign investment, leading to an appreciation of the Australian dollar (AUD).
This appreciation affects the exchange rate between the AUD and the Korean won (KRW), influencing the amount received when converting currencies. 



Considerations for Transferring Money Between Australia and Korea

For individuals transferring funds between Australia and Korea, understanding the dynamics of exchange rates and associated fees is crucial.

Here are the key considerations:

  • Exchange Rates: Monitor the AUD/KRW exchange rate to identify favorable times for transfers. Exchange rates fluctuate due to various economic factors, including interest rate changes and global market conditions

  • Transfer Fees: Different providers charge varying fees for international transfers. It's essential to compare these fees to minimize costs

  • Transfer Speed: The urgency of the transfer can influence the choice of service. Some providers offer faster transfers at higher fees, while others may take longer but are more cost-effective.​

  • Security: Ensure that the chosen transfer service is reputable and employs robust security measures to protect your funds.​

Current Exchange Rate Trends Between the Australian Dollar (AUD) and Korean Won (KRW)



As of April 1, 2025, the exchange rate stands at approximately 920.17 KRW per 1 AUD. 

Historical Exchange Rate Trends

Over the past year, the AUD/KRW exchange rate has experienced fluctuations influenced by various economic factors. For instance, in October 2024, the rate was around 913.71 KRW per AUD, slightly decreasing to 910.80 KRW in November 2024.
These variations highlight the dynamic nature of currency exchange rates, which can be affected by changes in interest rates, trade balances, and global economic conditions.

Optimal Timing for Currency Exchange

Determining the best time to exchange currency involves monitoring exchange rate trends and considering personal financial needs. Exchange rates are influenced by multiple factors, including economic indicators and geopolitical events, making precise predictions challenging. Therefore, it's advisable to regularly monitor the AUD/KRW exchange rate and plan exchanges when rates are favorable relative to historical trends.​

Practical Considerations for Exchanging Currency

  • Exchange Location: If you're planning to exchange cash, it's generally recommended to do so in Korea rather than Australia, as local rates may be more favorable. However, always compare rates and fees before proceeding.

  • ATM Withdrawals: Using international debit or credit cards at ATMs in Korea can be convenient. Ensure your card is compatible and inform your bank about your travel plans to avoid any issues. There are some credit cards or debit cards offer no fee for international transaction, so look for those. 

  • Fee Awareness: Be mindful of any fees associated with currency exchange or ATM withdrawals, as these can impact the overall amount received.​
 

​Best Practices for Cost-Effective and Secure Transfers

To optimize your international money transfers:

  • Compare Providers: Utilize comparison tools to evaluate exchange rates, fees, and transfer speeds among different services.

  • Stay Informed: Keep abreast of economic developments that may impact exchange rates, such as changes in interest rates or global trade policies.

  • Secure Transactions: Always use secure internet connections and verify the legitimacy of the transfer service to protect against fraud.

When transferring money between Australia and Korea, there are several key factors to consider, including transfer fees, exchange rates, speed, security, and convenience. Below are different types of money transfer options to help you make an informed decision based on your needs.

1. Bank Transfers

Pros:

  • Secure and reliable

  • Can be done online or through a branch

  • Directly transfers to the recipient’s bank account

Cons:

  • Often have higher fees and less competitive exchange rates

  • Processing time may take 1–3 business days

Best for: Large transactions where security and direct bank-to-bank transfer are preferred

2. International Money Transfer Services

Pros:

  • Competitive exchange rates

  • Lower fees than banks

  • Fast transfer speeds (some offer instant or same-day transfers)

Cons:

  • Some services may have hidden charges

  • Exchange rates may fluctuate frequently

Best for: Regular remittances or urgent transfers with a need for better exchange rates

3. Cash Transfer Services

Pros:

  • Ideal for recipients without a bank account

  • Quick transactions, sometimes instant

  • Available at physical locations for easy pickup

Cons:

  • Security issue if you do with strangers 

  • Exchange rates may not be as competitive

Best for: Emergency situations where the recipient needs cash quickly

4. Multi-Currency Digital Wallets

Pros:

  • Allows you to hold and exchange multiple currencies

  • Can be linked to a debit card for spending

  • Low-cost transfers between users

Cons:

  • Fees may apply when converting money or withdrawing funds

  • Not all businesses accept digital wallets

Best for: Travelers and frequent money senders who want flexibility in holding different currencies

Conclusion: Why the RBA’s Decision Matters to Me as a Korean Living in Australia

The Reserve Bank of Australia's (RBA) decision to hold the cash rate steady at 4.10% today has a direct impact on many aspects of my financial life.

As someone living in Australia with properties, I’m always seeking the lowest possible interest rate for my homeloan to reduce my mortgage repayments.
At the same time, I want the highest possible interest rate on my savings account to grow my funds efficiently.
The RBA’s decision influences both, and unfortunately, with rates unchanged, there’s no relief on homeloan repayments nor an incentive for better savings returns—at least for now.

Beyond interest rates, the RBA’s policy also affects the exchange rate between the Australian Dollar (AUD) and Korean Won (KRW), which is critical for me when sending money back home to my parents or handling expenses for travel and investments in Korea. A stronger AUD benefits me when transferring money to Korea, while a weaker AUD is better when I receive money from Korea.

It’s disappointing that the RBA decided to hold rates this time, but I’ll be closely watching their next move. A change in policy could bring much-needed relief on mortgage rates, better returns on savings, and more favorable exchange rates for my international transfers. Until then, I’ll stay informed and make strategic financial decisions to navigate these economic conditions. 😊

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