SA Local Government: Real Interest Rate

Nominal interest rates include a component to compensate lenders for inflationary expectations. The real cost of servicing loans that are set using nominal interest rates falls over time with inflation. If nominal interest rates are 7% and inflationary expectations are 3% this means that real interest rates are about 4%.

Date Real Interest Rate
30/06/2006 2.75%
30/06/2007 5.15%
30/06/2008 3.85%
30/06/2009 2.60%
30/06/2010 2.90%
30/06/2011 2.75%
30/06/2012 4.30%
30/06/2013 2.60%
30/06/2014 1.75%
30/06/2015 2.75%
30/06/2016 3.00%
30/06/2017 1.85%
30/06/2018 1.75%
30/06/2019 1.75%

Real interest rates should be used:

  • In the analysis of long-term projects as either the cost of capital or the opportunity cost of capital.
  • In calculating the cost of capital where the asset base is recorded at current costs, i.e. the assets have been revalued over time.
  • The real interest rate in the above table has been calculated by taking the LGFA CAD rate (actual or forecast) and deducting an amount for inflation using the ABS All Groups Annual CPI (for actual calculations) or the current LGFA forecast of 2.25% in 2018 & 2.5% in 2019 (for forecast calculations).
  • The estimated real interest rates are provided as a useful guide for budget deliberations.
  • Actual and Forecast Real Interest Rates will be updated in August each year.

(08) 8223 1550

Local Government Finance Authority of South Australia

Suite 1205, 147 Pirie Street
Adelaide SA 5000

PO Box 7050
Adelaide SA 5000

Phone (08) 8223 1550
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1800 188 045
Fax (08) 8223 6085
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