"The pattern illustrated in the graph is that important changes in trend for a broad measure of demand have generally been preceded by significant changes in the level of short-term interest rates. For example, major rises in interest rates in 1981/82, 1985 and 1988/89, which were designed to restrain inflationary booms, were all followed by contractions in demand. The smaller interest rate rises in 1994 and 1999/2000 were likewise followed by slower growth in demand. Conversely, major interest rate reductions have been followed by periods of significantly faster growth, as happened for example in the early and mid-1990s. In responding to cyclical developments and inflationary pressures, monetary policy has thus had a powerful influence on aggregate demand and economic activity."
You can see from the RBAs own graph above, that every time interest rates went up through 8%, demand fall off rapidly.
