Discount rate march 2022


Discount rate update – 31 March 2022

Rising market discount rates

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Markets have been volatile over the last three months, with the anticipated COVID-19 recovery being hindered by the conflict arising in Ukraine and coinciding with a  rapid rise in government bond yields around the world. With market conditions  continuing to evolve rapidly in response to these events, we have provided an  update on our assessment of discount rates as at 31 March 2022.

Philip Lowe, Governor of the RBA recently commented, “Inflation has increased  sharply in many parts of the world. Ongoing supply-side problems, Russia’s invasion  of Ukraine and strong demand as economies recover from the pandemic are all  contributing to the upward pressure on prices. In response, bond yields have risen and expectations of future policy interest rates have increased. The Australian  economy remains resilient and spending is picking up following the Omicron  setback.”

After a period of volatility, the ASX200 ended the month of March 2022 higher than it  was as at 31 December 2021. This increase was driven by higher earnings  expectations, partially offset by increased discount rates. The increase in discount  rates was driven by a substantial rise (over 110 bps) in the 10-year Commonwealth government bond yield. The relatively smaller increase in implied discount rates  indicates a reduction in the equity market risk premium for Australia, despite the  introduction of uncertainty from the Russia-Ukraine conflict and ongoing disruptions  to the global supply chain.

The impact of these changes on overall market discount rates is presented below.

Market discount rates have risen


March 2022 discount rate update WACC

Source: Leadenhall

Whilst recent market optimism has reduced the implied market risk premium, overall market discount rates remain substantially higher compared to December 2021,  largely due to rising bond yields.

Companies should consider the impact the sharp rise in discount rates will have on their valuations, whether on their investment decisions or for impairment testing. For  further information on selecting an appropriate discount rate for your company  please feel free to call us.


Leadenhall has provided valuation expertise and advice for more than 30 years. We  specialise in the valuation of businesses, companies and intellectual property as part of:

  • Independent expert’s reports for listed and unlisted public companies
  • Dispute resolution and shareholder determinations
  • Financial reporting including impairment assessment, intangible assets and financial instruments
  • Tax compliance
  • Transaction evaluation


Leadenhall doesn’t just offer thought leadership; it
prides itself on knowledge delivery. You can trust us to go beyond the maths, provide you with a deeper understanding of the assumptions made and  produce a valuation that you truly understand. That  means you can proceed with certainty, safe in the  knowledge that you won’t risk your reputation – or  the outcome of any transformative business decision you make.



17 May 2022


For further information on selecting an appropriate discount rate for your company or cash generating units please feel free to contact us.



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