1. Introduction: The Reserve Bank of Australia is considering a monetary interest rate increase of 25 basis points in the near future. It is the intention of this report to analyze the positive and negative impacts of an increase in interest rates on the loanable funds market in Australia. In order to analyze the impacts of an increase in interest rates on the loanable funds market, the reasons behind a possible increase in rates in the near future will be taken into consideration. Graphs and diagrams have been used to illustrate the purpose of this report and it is hoped that by looking at these vital elements the intended user will be able to understand the problem in more depth and follow the analysis behind it and gain a clear understanding of the problem.2. Reserve Bank of Australia (RBA) Cash Rates: The Reserve Bank's monetary policy actions are directed at influencing the level of interest rates in the financial system in order to achieve its economic objectives (Viney, 2005). Cash rates are the rate of interest paid in the interbank market for currency settlement account funds. The target cash rate can only be set by the Reserve Bank, it is decided monthly when the Reserve Bank (RBA) board meets and considers various financial indicators from around the world and the target inflation rate. The main purpose of the interest rate is to control inflation. Kruger & Coorey (2007), state that the Reserve Bank announced this morning a 0.25 percentage point increase in interest rates to 6.5%. This increase influences output, employment and prices through a series of complex and interrelated channels that affect the cost and availability of funds for the business and household sectors. Source: Sydney Morning ...... half of paper ... ... interest rates could be beneficial to the Australian economy, but if the interest rate continues to rise, it will hamper the loanable funds market as no one would be interested in taking loans from the bank at a high interest rate.7. Recommendations: The Reserve Bank raises and lowers interest rates in order to control inflation. The RBA should be careful when raising interest rates because if they raise them by much, this will result in inflation which will make everything expensive and negatively affect the economy. At the same time, when the RBA decreases interest rates, you should be careful not to reduce it very much, otherwise the RBA would lose its revenue. If the RBA increases or decreases interest rates by 0.25% to 0.40% per annum, this will be beneficial for businesses, as well as the economy and the funds market in Australia.