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
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…….
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.
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.