Inflation remains high, although there are signs that inflationary pressures are moderating following three consecutive increases to the cash rate target since December 2025. Global energy supply continues to be impacted by the conflict in the Middle East, with resolution remaining uncertain. The selection of a reasonable discount rate therefore remains a key consideration, whether for the purpose of financial reporting or for any valuation analysis.

Markets have been volatile over the last few months as conflict in the Middle East has led to substantial increases in oil prices and higher inflation expectations, at least in the near-term. With government bond yields at their highest levels since 2011 and market conditions continuing to evolve, we have provided an early warning on our assessment of the equity market risk premium (EMRP) as at 31 May 2026 for Australia.

In the current environment, it is not just a compliance exercise. It is a judgement call that can materially influence reported results. At the centre of that judgement is the discount rate, often one of the most sensitive and closely scrutinised inputs in any impairment model. Get it wrong and the consequences are real. Asset values can be distorted, audit challenges can emerge, and confidence in reported outcomes can be undermined.