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Reduction of the Commonwealth Property Principles hurdle rate.
14 May 2002 18/2002
Reduction of the Commonwealth Property Principles Hurdle Rate
The Government has recently completed a review of the rate of return used to decide whether the Commonwealth should own property and has reduced the required rate of return (known as the "hurdle rate") to 11 per cent.
The Commonwealth Property Principles state that the Commonwealth should only own property where the long term yield exceeds the Commonwealth's hurdle rate or where it is in the public interest to retain the property.
"The Commonwealth should own property when the anticipated yield on the property exceeds the return the Commonwealth could make using the money in some other way," Senator Minchin said.
"The hurdle rate is calculated by looking at the Government's cost of capital. As the cost of capital has fallen since the hurdle rate was last set, it is appropriate that the hurdle rate be lowered from 14-15 per cent to 11 per cent.
"I am pleased that with the adoption of the lower hurdle rate, two CSIRO properties currently proposed for sale in 2003-04, Marmion in Western Australia and Cleveland in Queensland, will not need to be sold as they now both meet the Government's new required rate of return," Senator Nick Minchin concluded.
The new rate will apply from 1 July 2002.
Contact: David Wawn Senator Minchin’s office 02 6277 7400
Media Release 18/02 - Reduction of the Commonwealth Property Principles Hurdle Rate
http://www.finance.gov.au/scripts/Media.asp?Table=MFA&Id=342 [15/05/2002 2:05:28]