An educational resource, explained through a broker’s lens. A teaching simulation of the WMM gearbox: turn each force to learn why a rate moves and how the pieces connect. It is not financial advice, and not a rate quote, a borrowing estimate or a forecast.
The readings are real and sourced. Here is the honest fine print, because a page of real figures has to disclaim it.
The starting point is the real cash rate, refreshed each week from the RBA. Everything else, how hard each force pushes, is a considered teaching view, not a measured reading and not a forecast. Here is exactly what sits under the dials, in the open.
The number on each cog ranks how hard that force tends to move the cost of cash, from one, the strongest, to seven, the weakest. The order broadly reflects the emphasis the Reserve Bank places on inflation and the labour market; it is a teaching choice, not a measured ranking. Inflation appears twice on purpose, as the headline figure everyone sees and as the trimmed mean, the underlying trend the RBA leans on. They are one force seen two ways, the noisy surface reading and the steadier signal, not two separate pushes to be added up. Government debt carries no number on purpose, because its pull is the open question the machine asks.
| Force | Max push, either way | What heating means |
|---|---|---|
| Inflation | 0.90% | prices rising faster, the RBA leans towards raising |
| Trimmed mean | 0.70% | underlying inflation running firmer |
| Jobs market | 0.60% | tighter labour market, wage pressure building |
| Growth | 0.50% | the economy running hotter than trend |
| Global shocks | 0.45% | oil or conflict adding to price pressure |
| Confidence | 0.40% | households and firms spending more freely |
| Bond yields | 0.35% | long rates, mostly reflecting where the market expects rates to head |
| Government debt | 0.60% | heavy borrowing could push rates up, though how much is genuinely debated |
The ideas behind the gearbox, in plain English, for brokers, CFOs, and anyone learning how it works. General education, not advice.
A home loan sits on the bank’s cost of funds, a blend of deposits and wholesale money, plus the bank’s margin. So it tracks the cash rate loosely: the bank chooses how much of each move to pass on, and when.
That is why two lenders can charge different variable rates off the very same cash rate, and why the machine above is such a clean way to show a client what is actually pushing their repayment.
Lenders do not test a client at the actual rate. Under APRA guidance they assess serviceability at a set buffer above it, currently 3 percentage points, so a 6% rate is tested near 9%.
That buffer is why borrowing capacity shrinks when rates rise, even before a single repayment changes. The assessed at line in the panel shows the repayment a lender actually tests against.
Fixing locks a rate for a term; variable rides the cash rate up and down. When the curve is flat or falling, the fixed rates on offer sit close to or below the current variable rate; when it is steep, longer fixed terms are priced higher.
A split loan is part fixed and part variable: the fixed part holds if rates rise, the variable part follows if they fall.
Refinancing means replacing a loan with a new one. Brokers and borrowers commonly look at it around events such as a fixed term ending, a gap between an existing rate and current market rates, or a fall in LVR into a better tier.
The comparison rate blends the interest rate with most standard fees, which is how two loans can be lined up on a like for like basis.
The base is BBSW, a live market benchmark that sits right on the cash rate and moves by the day. The margin is set once, at signing, for your risk.
So a business floating rate moves largely with the cash rate, though BBSW can move ahead of it. It is transparent: BBSW is public and moves daily.
You sign that margin with your lender, the bank or fund putting up the money. For a large loan it can be a syndicate of lenders under one agreement.
Takeaway: because BBSW is public, the direction of a floating business rate is visible in it.
The base is the bank’s cost of funds, a blend of the deposits and wholesale money it borrows to lend to you. The margin is the bank’s.
So a home loan tracks the cash rate loosely. The bank decides how much of each move to pass on, and when, so it is set at the bank’s discretion.
Takeaway: two banks can charge different variable rates off the very same cash rate.
No one, by hand. Since 2018 it is measured from real trades. Each morning the major banks’ short term bills change hands, and ASX works out BBSW as the volume weighted average price of those trades. ASIC regulates it, and rigging it is a crime. So the market sets it and ASX publishes it, just above the cash rate.
BBSW is the short rate, this month’s wholesale price of cash, on the cash rate. Bond and swap yields are the long rate, years out. Two points on the curve, not one added to the other. Floating debt uses the short rate; a fixed rate is priced off the long rate.
Every business chooses one of three postures.
If the cash rate rises, a fixed or hedged rate stays at the level locked in; if it falls, a floating rate follows it down. Which way it goes is unknown, which is the whole point of the machine.
A swap lets you switch a floating loan to fixed without refinancing the loan itself. Read the curve: flat or falling means fixed rates sit near or below variable; steep means longer fixed terms cost more.
A partial hedge covers part of the debt rather than all of it, so part of the cost is fixed and part still moves with rates.
The yield curve is the rate for borrowing over one, three, five and ten years, plotted together. Usually it slopes up: longer terms are priced higher.
When it inverts, with short rates above long, it reflects the market pricing rates lower ahead, which has historically often preceded a slowdown. It is where the market is pricing rates, not a forecast from this tool.
BBSW is the business world’s reading of the cost of cash. The curve reflects where the market is currently pricing the big gear to turn next, not a forecast from this tool. A swap is how a CFO stops the gear from moving their debt cost.
Inflation and the jobs market move the cash rate, the cash rate drags BBSW, BBSW sets the base on the loan, and hedging decides how much of that the company actually feels. A treasurer watches the very same gears above, just under different names.
AUD/USD US$0.70 · AUD/USD, 27 July 2026, moves daily.
A softer Australian dollar lifts the cost of imported goods and services, which feeds into inflation, one of the forces that turns the big gear. So even in a machine about the cost of cash, the currency has a place: it is one of the pipes the pressure moves through. It matters to a treasurer with import costs, offshore revenue, or debt in US dollars.
market, refreshed weekly, moves daily
AUD/USD is how many US dollars one Australian dollar buys. A lower number is a weaker Aussie dollar, which makes imports dearer and adds to inflation. A higher number is a stronger dollar, which does the reverse.
It is context a treasurer watches, not a force this tool scores. The cash rate, not the currency, is the gear the machine turns. This sits beside it.
A daily signal to sharpen judgement, for professionals who act, not react.
See the Briefs