Why are we reviewing our discount rate methodology?
We are reviewing the methodology we use to calculate the discount rate for local government infrastructure contributions. We recommend councils apply this discount rate if they are using a net present value (NPV) approach to calculate contributions. IPART calculates and publishes the discount rate every 6 months.
This review seeks to ensure that our discount rate methodology is fit for purpose and consistent with several aims, including cost-reflectivity and the timely provision of local infrastructure.
What is our draft decision?
Our draft decision is to maintain a cost of debt-based approach to calculate the discount rate, with a new risk adjustment. We propose to update our method to better estimate the benchmark debt margin for all local councils by using a benchmark credit rating of A-, which is lower than the rating of A we currently assume.
Our proposed update would continue basing the discount rate on councils’ cost of debt and include a new risk adjustment for a weighted-average debt margin for A and BBB rated bonds to derive a benchmark credit rating of A-.
We consider that this update to our method would better capture the level of risk and uncertainty faced by councils providing local infrastructure in new developments. In short, the update would better estimate councils’ risk premium. This would likely result in a higher discount rate than in our past biannual updates.
Using the relevant market observations as at the end of January 2026, our draft decision would result in a nominal discount rate of 4.8%, compared to 4.0% using our current methodology from our February 2026 update.
When are submissions due?
We welcome submissions for this Draft Report, due by 15 May 2026.
Stakeholders are welcome to contact us if they would like to meet to discuss the Draft Report. We do not intend to hold another public workshop on this review.
We expect to publish our Final Report in June, once we have completed consulting on our Draft Report.
Our Final Report will set out our final decision on the discount rate methodology we recommend Councils apply when using an NPV approach for calculating the contributions to be paid by developers for local infrastructure.
See more information about this review
For further information, please see the Review of IPART’s discount rate methodology for local government infrastructure contributions landing page.