I have written many articles about the cost of living here in Australia on this website. But a few months ago, I realised I hadn’t written anything about the same subject for my monthly column in Australia and New Zealand magazine.
So I decided to put that right, and starting in their “summer issue”, which came out just over a month ago, I began the first of a trilogy comparing the cost of living between the UK and Australia.
I gave it a working title of “How Expensive is Australia?”, They called it…
Money, money, money
Many people believe Australia has become very expensive over the last few years, to the extent where it is actually putting people off of a move. What’s the truth? Look no further than one of the hottest and most contentious subject of all, house prices compared between our two countries.
Five years ago, during 2007 and before Northern Rock scared the living daylights out of their investors, one GBP would buy 2.5 Aussie dollars. These days you get just 1.5 Aussie dollars to the pound. So back in the good old days, if you sold your house for £200,000, you could convert that into $500,000 AUD and buy a much bigger house down under.
But today, your £200,000 gets just $300,000 AUD and you will struggle to buy anything decent for that. But have house prices risen massively in Australia? No! Over the same period, they’ve probably remained flat.
But based on those calculations, it’s easy to believe house prices here in Australia are now more expensive than in the UK. But if we take the median price of an Australian detached residential dwelling, $460,000, and divide by average annual income, $69,000, we get 6.6.
So, theoretically, if you paid none of that silly tax stuff, didn’t buy any food or anything, but simply paid all of your wages towards your house with a mortgage that had no interest, it would be paid off in less than 7 years.
Let’s do the same maths for the UK. The average price of a detached house is £317,000, divided by average salary, £26,200, and we’re now looking at 12 years. So, I would suggest, buying a house for Australians, living here in Australia and earning Australian dollars, does seem cheaper, doesn’t it?
There is a flaw in my figures that would make economists wince. I have mixed median prices in Australia with average prices in the UK. But the only un-biased source here on house prices is the governments’ Australian Bureau of Statistics. They only talk in medians, but I’d rather go with their figures.
On the plus side, I have compared detached houses with detached houses; our governments provided the average salaries figures and the BBC was my source for UK house prices. So I haven’t made it up, I believe this example perfectly highlights what is really going on.
Australia hasn’t suddenly become very expensive; the great British pound has simply become a weak currency against the Aussie dollar.
The lesson to learn from this is never simply convert GBP to AUD to find out how much something costs in Australia. It will scare the life out of you! Instead, work out how much you would earn an hour in Australian dollars here in Australia, then how long you would have to work to buy the item. Then compare that to how long you would have to work in the UK to buy the same thing.
I call it the ‘hard yakka’.
Here’s a quicker formula: How much would you need to earn in Australia to have at least as good a lifestyle as you currently have in the UK? Rule of thumb; whatever you earn in pounds, double it in Australian dollars, easily done, see average earnings, and as we say here, ‘she’ll be right’.