On the day where we all get together and pin our spare change on a horse, the RBA pulls the reins and increases the official cash rate by 0.25%.

The RBA argues that increases are needed to cool the pace of the economy and let some steam out of the housing market, so that inflation stays on course for its target in the years ahead.  So who wins when rates go up?

The Winners: Cash holders earning more interest.

The Losers:  The Mortgage Belt. It’s another $15 a week on a $300,000 home mortgage.

Ok, I hear you….its not as simple as that. What about the effect this will have on home buyers in the market, what about house prices, the Aussie dollar, exchange rates, inflation, unemployment? How do you really know if you win or lose?

Well, it’s a bit like explaining how $15 a week less in your pocket means you don’t buy your wife a bunch of flowers this week, and whether or not she still makes you breakfast in the morning and how that impacts you getting to work on time, and how your boss frowns when you arrive late, and then he doesn’t give you a pay rise next month, and then you don’t buy your wife flowers again.

In an interconnected economy, it all goes around in circles…just like the runners in the Melbourne Cup.

So put your money in wise investments and make sure you have enough savings to run the RBA interest rate race in the coming year, with more rate rises expected.

P.S. Don’t forget the flowers.