The public sector discount rate plays a key role in cost-benefit analysis and government decision making

New Zealand Institute of Economic Research (Inc)
Media Release, Thursday 12 September 2024

The public sector discount rate plays a key role in cost-benefit analysis and government decision making.

The Treasury has not updated its discount rate in over four years. Since then, market interest rates have risen sharply, putting Treasury’s guidance out of date. Changing social attitudes suggests that it is time to take a more in-depth look at New Zealand’s discounting approach rather than just updating the numbers.

This Insight is aimed at public sector workers who would like to gain a deeper understanding of the discount rate. It provides an overview of the discount rate, including how it is used, how it has changed over time, and how it compares to other countries. It outlines the main approaches to determining the discount rate and highlights key issues that have shaped the debate.

Throughout the Insight, we argue that the discount rate is a tool to support evidence-based decision making. While its theoretical underpinnings are important, discussion should focus on how it works in practice. Arguments about the discount rate are often motivated by ethical or political views, a balanced and transparent perspective is needed to maintain the credibility of public sector advice.


For further information, please contact:
Adrian Katz
Senior Economist
027 265 1955
adrian.katz@nzier.org.nz