Markets have been volatile over the last quarter with uncertainty surrounding global trade policy and the broader economy, alongside inflation and recession concerns. With market conditions continuing to evolve rapidly, we have provided an update on our assessment of discount rates as at 31 March 2025.
“… we set monetary policy such that inflation is expected to return to the midpoint of the target range. And we do that because it maximises the chances of inflation remaining sustainably in that range. The rate cut in February reduces the risks of inflation undershooting that midpoint, but the Board does not currently share the market’s confidence that a sequence of further cuts will be required.”
The ASX200 ended the month of March 2025 lower than 31 December 2024. With a slight increase in the 10-year Commonwealth government bond yield and lower growth expectations, this implies a rising equity market risk premium (EMRP) for Australia. As a result, we have increased our assessment of the EMRP to 5.0% as at 31 March 2025.
The impact of these changes on overall market discount rates is presented below.
Rising market discount rates
Source: Leadenhall
With the increase in both government bond yields and EMRP, overall market discount rates are now slightly higher compared to December 2024.
Companies should consider the impact the change 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 contact us.
About Leadenhall
Leadenhall has provided valuation expertise and advice for more than 30 years. We specialise in the valuation of businesses, companies and intangible assets 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.
Our difference
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.
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