The rising cost of living in Australia
While the standard of living in Australia rises, so too does the cost of livingi. Find out how the current economic climate in Australia affects locals and travellers alike, now and into the future.
Australians enjoy relatively high incomes and a high standard of living, but they also face the high costs of goods, services and utilitiesi,ii. On a global stage, tourists and investors are beginning to overlook popular Australian destinations like Melbourne and Sydney due to unfavourable foreign exchange ratesiii.
According to a Deutsche Bank survey released in April 2013, Australia ranked most expensive worldwide in terms of purchasing parity power (PPP), followed by New Zealand and Canada consecutivelyiv. The survey, which collated the prices of common and luxury goods such as petrol, iPhones, and a pint of beer from 19 countries around the world, aimed to 'map the world's prices' by comparing the same goods in each countryiv. All prices were presented in US dollars with prices from New York used as the baselineiv.
The survey found that Sydney was the most expensive destination for a weekend holiday, with those living in Melbourne and Sydney paying almost 40 per cent more for a movie ticket than someone living in Manhattan or Parisiv. Other comparisons found that the price of a 2-litre bottle of Coca-Cola in the same two Australian cities were also at the top of the listiv.
The survey also compared price variations over the last decade for common and luxury goods like a loaf of bread, a packet of cigarettes and a litre of petroliv. In Sydney, a 1kg loaf of bread cost $5.03 on average in 2013, compared with $3.33 in 2008, and $1.97 in 2003iv. The price of petrol, a taxed good, has also risen sharply from 50c per litre a decade ago to $1.50 per litre today. The price of a loaf of bread in Melbourne, however, rose steadily from $1.91 in 2003 to $3.18 in 2008, and to $5.36 in 2012, but then dropped down $4.87 todayiv.
The sharp rise in the cost of living, partly resulting from strong exchange rates, the mining boom and high wagesi, has seen Australian cities propelled to the top of the cost of living lists in the Deutsche Bank's surveyiv. This is in stark contrast to a little more than a decade ago, when in 2001, not one Australian city made it into the top 10iv.
A report prepared by the University of Canberra's National Centre for Social and Economic Modelling (NATSEM) found that cost increases in utilities (water, gas, electricity), along with health and education had also contributed to the rising cost of living in Australiav. Utilities rose 14% from 2012, health went up by 6.2% and education by 5.5%v. These costs, especially utilities, made up a higher share of low-income household expenditure but had little impact upon high-income householdsv.
The effects of the high dollar are also detrimental to the tourism industry, one of Australia's most important sectorsvi. In the latest World's Best Awards by acclaimed travel magazine, Travel + Leisure, Sydney was placed outside of the top 10 in the World's Best Cities categoryiii,vii. The magazine states that Sydney fell short in the 'value for money' categoryiii,vii, reflecting the stance of the Deutsche Bank's survey that the city was the world's most expensive to visitiv.
Although standards of living for Australians have also increased, the rising cost of living can lead to financial pressure for families with low or single incomesv. Whether it is buying movie tickets at the cinema or paying the electricity bill, Australia's cost of living can have a significant impact on lifestyle. Being unable to provide for your family can affect the quality of your children's life in more ways than one –their education, health and happiness can all be impacted. Life insurance can protect your family from financial loss if something goes wrong and can help them get back on track to the lifestyle they had.