Figure 1 Discount Rate inputs
|
| "Old" PV Methodology* | National PPP Guidelines Methodology |
| Risk Free Rate | Average of the ten-year Commonwealth bond rate for the last 6 months | A jurisdiction specific long term bond rate (For Victoria, based on advice from TCV, the one month rolling average yield on TCV 10 year bonds will be used) |
| Market Risk Premium | 6% real | 6% real |
| Asset Beta | Determined from table of indicative betas or from market data | Determined from table of indicative betas or from market data |
| Risk Premium for Discounting the PSC | Project risk premium | None |
| Risk Premium for Discounting Bids | Project risk premium | A proportion (can be from 0% to 100%) of the project risk premium, reflecting to proportion of the systematic risk that is transferred |
| Inflation assumption* | DTF long-term forecast | "A balanced view of long-term inflation" |
* The "Old" Partnerships Victoria methodology described here is the general methodology applicable to most projects. The Partnerships Victoria guidance also set out a special methodology for projects where there is material systematic risk transfer. The special methodology was much the same as the new National PPP Guidelines methodology.
* This is the inflation assumption to be used (if required) to convert between real and nominal discount rates. It is not necessarily the inflation assumption used for escalation purposes which is determined in accordance with Annexure 5. It is expected that the rate determined in accordance with Annexure 5 will be a balanced view of long-term inflation.