However, Australia retains a substantial degree of monetary policy autonomy by virtue of its floating exchange rate. In other words, a change in policy rates elsewhere need not mechanically feed through to Australian interest rates.
While Australian banks raise significant amounts of funding in offshore markets, they are able to insulate themselves – and by extension Australian borrowers – from changes in interest rates in other jurisdictions. Just before delving into the details, some context is in order. First, Australian banks have long borrowed in wholesale markets, including those offshore.