The Treasury provides specific guidance on the public sector discount rates to be used in cost benefit analysis.
The public sector discount rates that agencies should use when undertaking cost benefit analysis (CBA) are set out below.
The Treasury derives the public sector discount rates using the two internationally-recognised approaches to setting rates, the ‘social opportunity cost of capital’ (SOC) and the ‘social rate of time preference’ (SRTP).
The Treasury expects that agencies use the following real, pre-tax discount rates. If agencies determine a project-specific discount rate on objective grounds, agencies can use these in addition to the public sector discount rates.
| Public Sector Discount Rates (Real) | Year 1-30 | Year 31-100 | Year 101+ | Sensitivity test (mandatory) |
|---|---|---|---|---|
| Non-commercial proposals (SRTP) | 2% | 1.5% | 1% | 8% |
| Commercial proposals (SOC) | 8% | 8% | 8% | 2% |
The Treasury intends to review these rates every three years, the next review to be in 2027.
The 2024 Treasury circular provides further information on the expectations and the background documents outline how the discount rates are derived. These are available below, along with expert reports which informed updates to the public sector discount rates. CBAx, the Treasury’s CBA tool, includes the rates.