IPART has published its Final Report on the review of its discount rate methodology for local government infrastructure contributions.
Our decision is to change our methodology for calculating the discount rate.
The change to our methodology involves maintaining a cost of debt-based approach to calculate the discount rate, with a new risk adjustment. Under the updated methodology, we will calculate the discount rate using the risk-free rate, a risk adjustment based on a weighted-average debt margin for A and BBB rated bonds, and IPART’s standard allowance for debt raising costs.
We consider this approach better reflects the risks councils face when they provide infrastructure through contributions plans.
We use our methodology to calculate the discount rate that we recommend councils apply if they are using a net present value approach to calculate local infrastructure contributions. IPART calculates and publishes the discount rate every 6 months. Our updated methodology applies from our August 2026 update onwards.
To find out more about IPART’s role in local infrastructure contributions plans, see here. To find out more about modelling local infrastructure contributions in a net present value framework, see our Technical Paper.