Australian Cities: Most Expensive in the World?

by BobinOz on August 24, 2011

in Cost of Living - Australia

A couple of weeks ago I did an update on the cost of living in Australia when I went grocery shopping again. I pretty much bought all of the same things I had purchased two years ago and was shocked to find that here in Australia, prices had barely changed during that time.

So what’s all this about then?

According to the Economist Intelligence Unit latest cost of living survey, Australian cities are getting more and more expensive in a spiralling out of control kind of way.

I have mentioned some of the stuff from the Economist before, they often rate our Australian cities as highly liveable, with Melbourne recently coming second in their liveability poll.

I have also mentioned their cost of living survey before; two years ago I remarked how the exchange rates affect the table. But at the time, I didn’t really know how the survey worked. This time, I think I do.

Australia’s meteoric cost of living rise.

The report itself talks about the “rapid growth in the relative cost of living in Australian cities“. It goes on to say that “Ten years ago Sydney was ranked 71st and Melbourne 80th, while Perth was ranked 91st and Brisbane was 93rd.”

Today the rankings are as follows:

  • Sydney – 6th
  • Melbourne – 7th
  • Perth – 13th
  • Brisbane – 14th

Whoa!!!!

Boy has it got expensive here over the last decade!

Or has it?

The surveys methodology.

Apparently this survey is based on the cost of goods in New York in US dollars. Whatever it costs there equals 100%, that’s why New York is always on 100%. New York, incidentally, is placed 49th.

Then all other cities in the world are judged and compared by that yardstick.

Now I’m trying to work out why this would be of interest to anyone who does not live in New York. As a New Yorker, I could earn my New York salary, in US dollars, get them changed into Australian dollars, pop over to Brisbane and buy my weekly shopping basket.

I could then compare costs and come to the conclusion that Brisbane is much more expensive than New York. How useful is that?

Not very, not to me.

Or I could just come to the conclusion that the US dollar is weak and the Australian dollar is strong. Because, let’s face it, the apparent rise in the cost of living in Australian cities in these survey’s is largely down to one thing. The fall in the US dollar coupled with the strengthening of the Australian dollar.

Those movements do not in any way affect the cost of living for Australians living and working in Australia.

But maybe I’m missing something? Surely I cannot doubt the wisdom of The Economist? Or can I? Yes I can.

I think this survey is useless. And I’m not the only one; here are a couple of others who agree…….

Rupert Denton

Adam Clancy

Conclusion

If you want to know how “expensive” it is to live in any city, you’ll need to do a little research. I think you’ll find the following method more useful than using New York as a yardstick.

  • First, you need to find out how much money you will earn in that city, in the local currency. If you are Australia bound, check out my page on finding work.
  • Second, translate that into an hourly rate. You can find out how I do it on my page called the hard yakka.
  • Third, find out the costs of all the things that YOU buy regularly. If you are looking at Australia, my page called The Cost of Living in Australia of Everything will help you.
  • Fourth, and finally, work out how many hours you have to work to buy those things.

Because the real cost of living of any city is how much of your time you have to invest in order to receive the goods that you want.

bread 300x199 Australian Cities: Most Expensive in the World?

How Much?

As an example, and I’m not suggesting this is totally accurate, but a quick search tells me that the average weekly wage in New York is $1,078 US. The Economist Intelligence Unit survey tells me that a 1 kg white loaf in the same city costs $6.06 US. So a New Yorker would work for around 13 & a half minutes to buy that loaf of bread.

Here in Brisbane, a 1 kg loaf of bread costs $3.84 AUD, which, according to Hard Yakka rates, would take just over 7 minutes of work to earn. Yet Brisbane is supposed to be more expensive than New York?

Of course, I’m not saying that example is correct, it is based on very loose research and limited information, but you get the idea.

If any of you get the idea of the Economist Intelligence Unit methodology (you can download their report here), please do explain it to me, because I just can’t see it. What I do see is that prices here in Australia are behaving just like any other country in the world. Some things have gone up a bit and some things have gone down a bit.

That’s what happens to the cost of living.

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{ 14 comments… read them below or add one }

Gordon August 25, 2011 at 7:16 pm

An economics major I am not , however I have been following real estate prices for a while as well as taking an active role in my superannuation investments post GFC ( I was passive before then but quickly learned my lesson ).

Broadly speaking , real estate prices have settled in Australia by “about” 5% although some places ( as always ) have bucked the trend and gone up . Also broadly speaking , wages have gone up an average 4% , meaning buying a home is now relatively more affordable than 2 or 3 years ago .

Interest rates are still low ( I bought my first house in 1988 with a mortgage at 13.75% which then went up to 17.25% within 3 months )

Compare that with the U.S. where property has been in freefall , unemployment at close to10% , huge foreign debt , marginal , if any , overall economic growth forecast for several years .
Apples and Oranges right now.

Imports ( wide screen t.v’s , cars , food products , crude oil etc. ) are all relatively cheaper because of the strength of the AUD ($)

Certainly the prices of some things have gone up but so have wages and pensions .

One loser is the tourism industry as our high dollar means it’s more expensive for foreigners to holiday here and cheaper for aussies to have that overseas trip ( it was only a few years ago that an Aussie dollar only bought about 50 cents U.S. )

These are still uncertain times , the possibility of a global double dip recession is real , however Australia is resource rich and China is resource hungry , the last 5 years globally has led to our 2 speed economy where some areas are booming and others faring not so well .

The Yakka is very good comparison tool but assumes a job can be had , given the rate of U.S. unemployment right now I’m not really surprised that “relative” affordability has improved for Americans , New York or not , assuming that they have a job.
If they don’t have a job , they’re between a rock and a hard place.

For people thinking about moving here under skilled migration , the very fact that you qualify should mean the possibility of earning good money , as far as I can see there has not been a better time to do that in 5 years as long as you get your head around poor exchange rates ( from your point of view ) versus the longer term prospects and lifestyle .

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BobinOz August 26, 2011 at 7:26 pm

Judging by what is going on in the rest of the world right now, and as you say, the possibility of a double dip recession, I’m hard pushed to think of a country better placed right now than Australia. It’s the place to be living in.

There aren’t many countries with our standard of living, our freedoms, our beautiful beaches and countryside AND loads of job vacancies for people with the right skills. If I was a young man with a skill that was in demand (two things I’m not) this would be where I would be heading.

Luckily, I’m already here :-)

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nij August 30, 2011 at 4:39 am

Yup…can’t agree with you more. I, and pretty much every Doctor I know is planning on emigrating Down Under…

No such thing as pay freezes or the stagnant prospects for professionals in Australia.

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BobinOz August 31, 2011 at 9:42 pm

Hi Nij

I think you would love it being a doctor out here, I reckon it must be totally different from how it is back in the UK. Obviously I’m not a doctor, but I am a patient now and then.

Whenever I have visited my doctor, he spends so much time with me, it is clear he is not in a rush. That wasn’t how it felt in England. Search doctor and a few articles will come up, but click here to read about my first ever visit to the doctors.

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Nicky August 26, 2011 at 5:21 pm

Thanks for always letting us know about the money stuff Bob. We’re on our way over to Brisbane in the new year and have obviously been saving like mad for ages and trying to get a good grasp of how much we’ll need for what. That said, I think us ‘poms’ can get a bit bogged down with it all – a few extra quids in your pocket over here is never gonna buy you the australian lifestyle so what’s the point? Have a bit less and be a bit happier if needs be.
Please ask Elizabeth to do her ’10 best things about living in Australia’. I’m bringing 3 little ones out there too.x

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BobinOz August 26, 2011 at 7:30 pm

I think one of the beauties of living in this country is you don’t have to have bucketloads of disposable income to have fun. Just go to the beach, the park, any one of the free outdoor events, join in some community fun or just go round a friends house and have a barbecue.

I’ll have a word with Elizabeth for you.

I hope the move goes well. Let me know when you get here. Cheers!

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Phil Beeby September 7, 2011 at 3:16 pm

Bob, Melbourne came out as number one most livable city – not second. Not sure what it all means – weather is down to 12 degrees on Saturday – so not number one when it comes to most livable weather (reckon Brisbane would take the crown)
http://www.bbc.co.uk/news/world-asia-pacific-14716442

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BobinOz September 7, 2011 at 8:23 pm

Yes, Melbourne came top (for livability) in the latest survey. I wrote this post about one week before their that one came out, so I was referring to last year’s result.

I know I called it recent, but that just shows how time flies when you’re living here in Australia.

We’ve had some gorgeous weather in Brisbane here last few days, about 23°C to 25°C. I reckon you’re right, we’d come a lot higher if it was all about the weather, ignoring floods of course.

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Phil Beeby September 15, 2011 at 5:23 pm

Nice one Bob – glad you’re enjoying the gorgeous Queensland weather. I’m hoping Spring kicks off in Melbourne this weekend as we’re getting back into the low twenties.

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BobinOz September 16, 2011 at 10:21 pm

Low 20s? We call that winter!

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Neill January 30, 2012 at 3:15 am

Bob,you mention that you don’t need a disposable income to have fun in Oz. I can assure you, you do. I didn’t live by a beach in Australia at all,I lived in where there is no beach. The restaurants were expensive and awful,as are most in Australia,the cinemas are rubbish and unless you live by the beach in Australia, your life is drab and rubbish. I now live in Lyme Regis in Dorset and as an Australian I can safely say I have more to here than in Oz. wouldn’t move back to Australia even if you paid me,awful place!

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BobinOz January 30, 2012 at 10:17 pm

Well, I actually said you don’t need “bucketloads of disposable income”, I didn’t say you don’t need any at all.

And I don’t live by the beach either, my nearest beach is an hour and a quarter away. But, funnily enough, my life isn’t drab and rubbish.

I’m glad you have found somewhere you like though Neill, in Lyme Regis. It’s a fact of life that different people like different places. Nothing wrong with that!

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Sean February 16, 2012 at 12:03 am

Lyme Regis is a great place to live. If you like wearing beige as most of the other residents do!

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BobinOz February 17, 2012 at 12:02 am

Cream goes well with blue rinse.

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