That depends on which way you look at it. It also depends upon who you ask. Two major economic experts of the globe released two vastly contrasting stories with almost completely opposing headlines simultaneously last week, well, within a few days of each other.
I am grateful to 2 of my readers who both contacted me separately on the same day, Barry via Facebook and the Hailey directly by email.
Deutsche Bank versus The Economist
Let’s do this in the format of a very old joke. Ready? Okay, here goes.
There’s good news and there’s bad news, do you want the good news first or the bad news? At this stage, most people seem to want the bad news first, I suspect because it’s much better to end with good news. With that in mind, we’ll start with…
The bad news
Deutsche Bank says…
“AUSTRALIA has become one of the most expensive places on the planet, as the price for everything from a Big Mac to an iPhone exceeds that of most other major developed countries.”
The good news
The Economist says…
“THE LUCKY COUNTRY: Index shows Australians need to work least to buy A Big Mac”
I’m sure it did not escape anyone’s attention that in two simple statements it appears Australia has both the most expensive Big Macs in the world, whilst at the same time Australians appear to work the fewest hours, or minutes as is the case here, to earn the money to buy a Big Mac.
So are Big Macs expensive here or not?
If Deutsche Bank and The Economist can’t agree on this, then clearly it is not a simple yes or no question. Here’s my answer though; Big Macs are hugely expensive in Australia if you’re a tourist from, say, India, but Big Macs might just appear to be the cheapest in the world if you are resident of Australia and working here in this country.
Which, as my regular readers will know, is exactly what I’ve been saying with my hard yakka theory.
You can read much more about how ridiculously expensive Australia is by visiting the Deutsche Bank article over at news.com.au. Here are a couple of quotes I would like to bring to your attention though, simply because they are so important.
First, “In the past 10 years prices have soared around 200 per cent…‘ – that’s Australian prices apparently. The second quote is “All prices in US dollars“.
You see, in the Deutsche Bank statistics they are looking at the price of everyday items in Australia, then converting those prices into US dollars, then saying they have gone up hugely in the last 10 years.
In 2001, one US dollar could buy two Aussie dollars, a few months ago (about the time they would have been collecting data for this report) one US dollar equalled exactly one Australian dollar.
I’m no mathematician, but that sounds suspiciously close to the equivalent of a 200% rise (see note below) to me.
So why does The Economist say Australia is The Lucky Country? If you read the full article over at businessinsider.com.au you will, of course, get the full explanation as well as seeing some pretty graphs and a better picture of a Big Mac than I’ve got.
They decided to put a quirky little twist on purchasing power parity (PPP) theory by calculating out how long you would have to work to buy something, rather than simply how much you would have to pay. Sounds extraordinarily similar to my hard yakka theory, except The Economist used minimum wages and I used average.
Here’s just a glimpse of some of their findings:
Minimum hourly wages
- Australia – $16.88
- UK – $9.83
- United States – $7.25
- India – $0.28
… and based on those minimum wages:
Minutes worked to buy a Big Mac
- Australia – 18 minutes
- UK – 23 minutes
- United States – 35 minutes
- India – 347 minutes
So, Australia, Lucky Country or expensive country? You decide.
My thanks to both Barry and Hailey for bringing these articles to my attention, neither were overly concerned or surprised by what they read as both were fully aware of my hard yakka theory.
I have never said Australia is a cheap country in which to live, but I’ve also never said Australia is an expensive country either. What I have said though, many times, is that statistics can be shown to prove anything.
First you need to decide what you want to prove, and then you need to find the statistics that prove it for you.
In my opinion, the Deutsche Bank report is at best misleading, at worst totally pointless. To give it the benefit of the doubt, it’s useful for Americans who want to decide which countries are cheapest to visit for a holiday.
The Economist’s report is far more relevant and useful to all the people who live in the many countries they have included in their results. This is also very interesting because it was only a couple years ago that The Economist came out with a report that I described as “useless”.
You can read about that in my post Australian Cities: Most Expensive in the World? You can also marvel at how similar it was to last weeks Deutsche Bank article I’ve talked about here.
So it’s not actually who you ask that matters, as I suggested earlier, although statistics certainly can be made to prove anything. But if you take anything away from this article at all, I would want it to be that next time you read a headline saying something like “Australia is the most expensive country in the world”, do not take it at face value.
PS. Deutsche Bank said “the price for everything from a Big Mac to an iPhone exceeds …” etc. We’ve sorted out the Big Mac here, but for those of you who did not click on my hard yakka theory link above, maybe you should, because that also sorts out the truth about the cost of not quite the iPhone, but the iPad in Australia.