Q12. Why use a DTF-specified discount rate if a government department has money in the bank and the real cost of financing the project is the lost interest on those deposits?

The interest that government can earn on bank deposits has no relationship with the financing cost of an investment project. The true cost of capital for a particular investment project depends on the relative risks inherent in that project. It does not depend on the nature or source of the finance. For more information about discount rates, see National PPP Guidelines Volume 5: Discount Rate Methodology. Further advice and rates may be updated from time to time as required on www.partnerships.gov.vic.au Annexure 3.