It isn’t ‘the banks’, it is the Reserve Bank, a quasi-independant government department. They create and lend money to the other banks at a fixed rate, as well as making other changes.
Every month they meet and decide on what rate they should be charging. They are the major source of money to lend – for home mortgages, but mostly for business finance – so the rate at which you can get money from the federal reserve sets the rate elsewhere.
Latest Answers