The Treasury publishes here a table of risk-free discount rates and consumer price index (CPI) assumptions that must be used in certain accounting valuations for the purpose of preparing the Financial Statements of the Government of New Zealand.
This table of rates applies to all Government reporting entities submitting valuations to Treasury for:
- valuing insurance claims liabilities under PBE IFRS 4 Insurance Contracts
- valuing employee benefits such as pension obligations, long service leave and retiring leave under PBE IPSAS 25 Employee Benefits, and
- building a risk-adjusted discount rate for valuing student loans.
These rates may be applied to other valuations where a risk-free discount rate or CPI assumption is used. In these cases, the rates may either be used unadjusted, or as a building block to calculate another assumption at your discretion.
The Treasury risk-free discount rates and CPI inflation assumptions are based on a framework, including several parameters, summarised in eight steps. This framework has been kept unchanged since 2010, although the assumptions under each step are subject to review, generally every three years, and have changed over time in some cases.
The Treasury has also published the detailed Methodology here to accompany the table of rates. This document outlines the framework, parameters and key assumptions behind the calculation of the discount rates and CPI assumptions, providing context and transparency.
The risk-free discount rate methodology uses at its starting point the market yield curve of New Zealand Government Bonds as the most appropriate proxy for the return on a very safe asset.
Methodology Changes in May 2025
In line with the three-yearly review timetable, the parameters under the methodology have now been reviewed and are currently being audited. The 2025 review concluded some changes to the previous methodology, dated June 2022.
The main changes in the methodology, which are set out here, have been reflected in the 31 May 2025 rates.
- The real long term forward rate is set to 2.8% per annum (or 2.75% per annum on a compound basis). This is an increase from the 2.3% per annum from the previous review.
- As the real long-term forward rate will be set to 2.8% per annum and 2.0% per annum remains as the long-term inflation assumption, it means that the long- term nominal forward rate will set to 4.8% per annum. This is an increase from 4.3% per annum at the previous review.
In addition, there have been some minor changes to the CPI assumption:
- Inflation in the short to medium term will be determined as a 50:50 weighting between adjusted breakeven inflation and market forecasts. This weighting is unchanged from the previous methodology.
- When determining which bonds will be used to determine breakeven inflation:
- Bonds with an estimated market value of less than $4 billion will be excluded. This exclusion criteria is unchanged from the previous methodology.
- Bonds which mature in the following year will be excluded. This is a new exclusion.
- 0.3% per annum illiquidity premium will be added to break even inflation. This is unchanged from the previous methodology.
- 0.1% per annum inflation risk premium will be deducted from break even inflation. This is a change from the previous 0.3% per annum deduction.
Publishing dates
The Treasury will publish here risk-free discount rates and CPI assumptions as at 30 June, 30 September, 31 December, 31 January and 31 May. These rates will be published within one week of the "as at" date.
Tables of Risk-free Discount Rates and CPI Assumptions at 31 May 2025 for Accounting Valuation Purposes
The following table shows the risk-free rates to be used for certain accounting valuations as at 31 May 2025. Note that a history of these rates, starting with the 30 June 2010 rates, is available in the Excel spreadsheets below.
| Valuation Year (for Annual Cash Flows to 31 May) | Duration in Years | Forward Rate | Spot Rate |
|---|---|---|---|
| 2026 | 1 | 3.20% | 3.20% |
| 2027 | 2 | 3.65% | 3.43% |
| 2028 | 3 | 4.07% | 3.64% |
| 2029 | 4 | 4.46% | 3.85% |
| 2030 | 5 | 4.86% | 4.05% |
| 2031 | 6 | 5.14% | 4.23% |
| 2032 | 7 | 5.30% | 4.38% |
| 2033 | 8 | 5.42% | 4.51% |
| 2034 | 9 | 5.55% | 4.63% |
| 2035 | 10 | 5.67% | 4.73% |
| 2036 | 11 | 5.79% | 4.83% |
| 2037 | 12 | 5.91% | 4.92% |
| 2038 | 13 | 6.00% | 5.00% |
| 2039 | 14 | 6.06% | 5.08% |
| 2040 | 15 | 6.10% | 5.14% |
| 2041 | 16 | 6.10% | 5.20% |
| 2042 | 17 | 6.10% | 5.26% |
| 2043 | 18 | 6.10% | 5.30% |
| 2044 | 19 | 6.10% | 5.34% |
| 2045 | 20 | 6.10% | 5.38% |
| 2046 | 21 | 6.10% | 5.42% |
| 2047 | 22 | 6.10% | 5.45% |
| 2048 | 23 | 6.10% | 5.48% |
| 2049 | 24 | 6.10% | 5.50% |
| 2050 | 25 | 6.10% | 5.53% |
| 2051 | 26 | 6.10% | 5.55% |
| 2052 | 27 | 6.10% | 5.57% |
| 2053 | 28 | 6.10% | 5.59% |
| 2054 | 29 | 6.10% | 5.60% |
| 2055 | 30 | 6.07% | 5.62% |
| 2056 | 31 | 6.02% | 5.63% |
| 2057 | 32 | 5.97% | 5.64% |
| 2058 | 33 | 5.92% | 5.65% |
| 2059 | 34 | 5.87% | 5.66% |
| 2060 | 35 | 5.82% | 5.66% |
| 2061 | 36 | 5.77% | 5.67% |
| 2062 | 37 | 5.72% | 5.67% |
| 2063 | 38 | 5.67% | 5.67% |
| 2064 | 39 | 5.62% | 5.67% |
| 2065 | 40 | 5.57% | 5.66% |
| 2066 | 41 | 5.52% | 5.66% |
| 2067 | 42 | 5.47% | 5.66% |
| 2068 | 43 | 5.42% | 5.65% |
| 2069 | 44 | 5.37% | 5.64% |
| 2070 | 45 | 5.32% | 5.64% |
| 2071 | 46 | 5.27% | 5.63% |
| 2072 | 47 | 5.22% | 5.62% |
| 2073 | 48 | 5.17% | 5.61% |
| 2074 | 49 | 5.12% | 5.60% |
| 2075 | 50 | 5.07% | 5.59% |
| 2076 | 51 | 5.02% | 5.58% |
| 2077 | 52 | 4.97% | 5.57% |
| 2078 | 53 | 4.92% | 5.55% |
| 2079 | 54 | 4.87% | 5.54% |
| 2080 | 55 | 4.82% | 5.53% |
| 2081 | 56 | 4.80% | 5.52% |
| 2082 | 57 | 4.80% | 5.50% |
| 2083 | 58 | 4.80% | 5.49% |
| 2084 | 59 | 4.80% | 5.48% |
| 2085 | 60 | 4.80% | 5.47% |
| 2086 | 61 | 4.80% | 5.46% |
| 2087 | 62 | 4.80% | 5.45% |
| 2088 | 63 | 4.80% | 5.44% |
| 2089 | 64 | 4.80% | 5.43% |
| 2090 | 65 | 4.80% | 5.42% |
| 2091 | 66 | 4.80% | 5.41% |
| 2092 | 67 | 4.80% | 5.40% |
| 2093 | 68 | 4.80% | 5.39% |
| 2094 | 69 | 4.80% | 5.38% |
| 2095 | 70 | 4.80% | 5.37% |
| 2096 | 71 | 4.80% | 5.36% |
| 2097 | 72 | 4.80% | 5.36% |
| 2098 | 73 | 4.80% | 5.35% |
| 2099 | 74 | 4.80% | 5.34% |
| 2100 | 75 | 4.80% | 5.33% |
| 2101 | 76 | 4.80% | 5.33% |
| 2102 | 77 | 4.80% | 5.32% |
| 2103 | 78 | 4.80% | 5.31% |
| 2104 | 79 | 4.80% | 5.31% |
| 2105 | 80 plus | 4.80% | 5.30% |
The following table shows the CPI assumption rates to be used for certain accounting valuations as at 31 May 2025.
| Valuation Year (for Annual Cash Flows to 31 May) | Year | Forward CPI | Spot CPI |
|---|---|---|---|
| 2026 | 1 | 2.05% | 2.05% |
| 2027 | 2 | 1.96% | 2.00% |
| 2028 | 3 | 1.96% | 1.99% |
| 2029 | 4 | 1.97% | 1.98% |
| 2030 | 5 | 1.97% | 1.98% |
| 2031 | 6 | 1.95% | 1.98% |
| 2032 | 7 | 1.95% | 1.97% |
| 2033 | 8 | 1.95% | 1.97% |
| 2034 | 9 | 1.95% | 1.97% |
| 2035 | 10 | 1.95% | 1.97% |
| 2036 | 11 | 1.95% | 1.96% |
| 2037 | 12 | 1.95% | 1.96% |
| 2038 | 13 | 1.95% | 1.96% |
| 2039 | 14 | 1.95% | 1.96% |
| 2040 | 15 | 1.95% | 1.96% |
| 2041 | 16 | 1.95% | 1.96% |
| 2042 | 17 | 1.95% | 1.96% |
| 2043 | 18 | 1.95% | 1.96% |
| 2044 | 19 | 1.96% | 1.96% |
| 2045 | 20 | 1.96% | 1.96% |
| 2046 | 21 | 1.96% | 1.96% |
| 2047 | 22 | 1.96% | 1.96% |
| 2048 | 23 | 1.96% | 1.96% |
| 2049 | 24 | 1.96% | 1.96% |
| 2050 | 25 | 1.96% | 1.96% |
| 2051 | 26 | 1.96% | 1.96% |
| 2052 | 27 | 1.96% | 1.96% |
| 2053 | 28 | 1.97% | 1.96% |
| 2054 | 29 | 1.97% | 1.96% |
| 2055 | 30 | 1.97% | 1.96% |
| 2056 | 31 | 1.97% | 1.96% |
| 2057 | 32 | 1.97% | 1.96% |
| 2058 | 33 | 1.97% | 1.96% |
| 2059 | 34 | 1.97% | 1.96% |
| 2060 | 35 | 1.97% | 1.96% |
| 2061 | 36 | 1.98% | 1.96% |
| 2062 | 37 | 1.98% | 1.96% |
| 2063 | 38 | 1.98% | 1.96% |
| 2064 | 39 | 1.98% | 1.96% |
| 2065 | 40 | 1.98% | 1.96% |
| 2066 | 41 | 1.98% | 1.96% |
| 2067 | 42 | 1.98% | 1.97% |
| 2068 | 43 | 1.98% | 1.97% |
| 2069 | 44 | 1.99% | 1.97% |
| 2070 | 45 | 1.99% | 1.97% |
| 2071 | 46 | 1.99% | 1.97% |
| 2072 | 47 | 1.99% | 1.97% |
| 2073 | 48 | 1.99% | 1.97% |
| 2074 | 49 | 1.99% | 1.97% |
| 2075 | 50 | 1.99% | 1.97% |
| 2076 | 51 | 1.99% | 1.97% |
| 2077 | 52 | 2.00% | 1.97% |
| 2078 | 53 | 2.00% | 1.97% |
| 2079 | 54 | 2.00% | 1.97% |
| 2080 | 55 | 2.00% | 1.97% |
| 2081 | 56 | 2.00% | 1.97% |
| 2082 | 57 | 2.00% | 1.97% |
| 2083 | 58 | 2.00% | 1.97% |
| 2084 | 59 | 2.00% | 1.97% |
| 2085 | 60 | 2.00% | 1.97% |
| 2086 | 61 | 2.00% | 1.97% |
| 2087 | 62 | 2.00% | 1.97% |
| 2088 | 63 | 2.00% | 1.98% |
| 2089 | 64 | 2.00% | 1.98% |
| 2090 | 65 | 2.00% | 1.98% |
| 2091 | 66 | 2.00% | 1.98% |
| 2092 | 67 | 2.00% | 1.98% |
| 2093 | 68 | 2.00% | 1.98% |
| 2094 | 69 | 2.00% | 1.98% |
| 2095 | 70 | 2.00% | 1.98% |
| 2096 | 71 | 2.00% | 1.98% |
| 2097 | 72 | 2.00% | 1.98% |
| 2098 | 73 | 2.00% | 1.98% |
| 2099 | 74 | 2.00% | 1.98% |
| 2100 | 75 | 2.00% | 1.98% |
| 2101 | 76 | 2.00% | 1.98% |
| 2102 | 77 | 2.00% | 1.98% |
| 2103 | 78 | 2.00% | 1.98% |
| 2104 | 79 | 2.00% | 1.98% |
| 2105 | 80 plus | 2.00% | 1.98% |
Using the Treasury Risk-free Discount Rates
Valuation models will use either forward or spot rates. Both of these rates have been provided.
Ideally, forward rates should be used for the accounting valuations. However, the ability to use forward rates will be dependent on the type of valuation programme or model used. The programme or model must be able to cope with different discount rates for each year in order to use forward rates.
If the programme or model only requires a single discount rate then select the spot rate that matches the duration of cash flows. For example, if the duration of cash flows is eight years, and the model requires a single rate, select the Year 8 spot rate from the table.
The annual forward and spot rates provided are to match annual cash flows from the "as at" date the rates are published. For example the 1 year rate published at 31 May 2025 is the risk-free rate to match the cash flow for the period 1 June 2025 to 31 May 2026.
Auditor Confirmation at 30 June 2024
The Office of the Auditor-General considers the table of risk-free discount rates and CPI assumptions as at 30 June 2024 have been determined in accordance with the associated methodology document (The Treasury Risk-free Discount Rates and CPI: Assumptions for Accounting and Valuation Purposes - June 2022). The rates and CPI assumptions are appropriate to use in:
- valuing insurance claims liabilities under PBE IFRS 4 Insurance Contracts
- valuing employee benefits such as pension obligations, long service leave, and retiring leave under PBE IPSAS 39 Employee Benefits, and
- building a risk-adjusted discount rate to value student loans.
The Treasury's Long Service Leave and Retiring Leave Models (per TC 2009/06)
If you use the Treasury Excel models to calculate long service leave and retiring leave obligations (per Treasury Circular 2009/06 below), only three risk-free discount rates can be used. This allows for the use of three forward rates. These three forward rates as at 30 June 2024 are published below.
However, if you know the average duration of future cash flows being valued, you can choose the single spot rate for that year, rather than three forward rates. For example, if you know the duration of cash flows at 30 June 2024 is on average 10 years, you could use the 10 year spot rate of 4.77% from the published table of rates at 30 June 2024 and enter it as all three discount rate assumptions in the model.
While the Treasury provides economic assumptions here, the model can be run using different discount rates and salary assumptions to assess how sensitive the valuation is to a change in the Treasury assumptions. For example, you could run the model using a rate that is plus or minus 1% from the Treasury rate. This can provide assurances around year end valuations and enable you to disclose sensitivity impacts.
30 June 2024
The following risk-free discount rates are applicable to be used in the Treasury models issued under TC 2009/06 for 30 June 2024 valuations:
- 1 year: 5.30%
- 2 year: 4.49%
- 3 year plus: 5.11%*
The Treasury Excel models also require a long-term salary inflation assumption of 3.33%**
- * This rate is based on the average of 20 forward rates (from year 3 to 22 inclusive) taken from the published table of discount rates as at 30 June 2024.
- ** This rate is based on using a 2.03% medium term inflation assumption (Spot CPI year 22) plus 1.3% for long term labour productivity growth for the public sector. On average over the longer term we would expect that nominal wages and salaries would grow approximately in line with inflation and the rate of labour productivity growth.
Contact for Enquiries
Angela Ryan | Fiscal Reporting, The Treasury
Tel: +64 4 917 6102
Email: [email protected]
Hannah Singleton | Fiscal Reporting, The Treasury
Tel: +64 4 890 7270
Email: [email protected]