Treasury / Motu Joint Seminar: The Treasury's Social Discount Rate

About this presentation In 2024, the Treasury changed the discount rate they use to evaluate public sector proposals. The new discount rate for non-commercial proposals is 2% p.a. (real), while the rate for commercial proposals is 8%. The reduction in the discount rate for non-commercial proposals from 5% to 2% has important implications for proposals that enhance long-term social and environmental outcomes (and for other proposals with long-lived payoffs). Treasury has updated their cost-benefit analysis manual (CBAx) to include this (and other) changes. This seminar will discuss these discount rate changes. One advisory input into the Treasury's decision process was a commissioned expert paper by Motu Research's Arthur Grimes, How Should the New Zealand Government Discount Future Payoffs? available at https://www.treasury.govt.nz/publicat... The Treasury has recently published a working paper on the social rate of time preference: Deriving values of the social rate of time preference (WP 25/01) available at https://www.treasury.govt.nz/publicat... Guidance on the public sector discount rates can be found at: https://www.treasury.govt.nz/informat.... Arthur Grimes (Motu Research) and Chris Parker (The Treasury New Zealand) will discuss ideas that led up to the changes. Kirsten Jensen (The Treasury New Zealand) and Geoff Simmons (Parliamentary Commissioner for the Environment) will discuss the public policy relevance. This seminar is organised jointly by Te Tai Ōhanga - The Treasury and Motu Research. About the presenters Arthur Grimes is a Senior Fellow at Motu Research and Professor of Wellbeing and Public Policy at Victoria University of Wellington's School of Government. Arthur's current research focuses on the economics of wellbeing and public policy, and on urban economics (including housing). He has published widely in both these fields and has published also on monetary and related topics. Chris Parker is a Principal Advisor in the Treasury's Housing and Urban Growth team. He is an economist with expertise in cost-benefit analysis and urban policy (eg, land, housing, infrastructure, local government). Previously, he was chief economist at Auckland Council, consultant at each of NZIER and Hyder Consulting, and at FRST (Foundation for Research, Science and Technology). Kirsten Jensen is a Principal Advisor in the Treasury's Public Finance Policy team. She led the Treasury policy work on the public sector discount rate, is leading public sector cost-benefit analysis and using the CBAx tool for advice. She has served as director on the international Society for Benefit Cost Analysis board. Geoff Simmons is the Chief Economist at the Parliamentary Commissioner for the Environment. He has worked as an economist for the Productivity Commission, the UK Home Office and Treasury New Zealand and served as a general manager at the Toi Mai Workforce Development Council and the Morgan Foundation. Geoff has also co-authored four books, two of which include a focus on environmental economics.