If you were to walk down the street and choose someone at random or sit with four or more people to discuss the cost of living in Australia, it is likely that their comments would indicate serious financial hardship. A new report also lists Australia as the most expensive country to live in. But everything is relative and when you factor in a couple of other things like wage indexation and culture you must ask the question, are Australians crying poor when the high cost of living is just an illusion?
Comments like “fuel is too expensive”, “bills are larger than my income” and those who are doing it tough throw around “some weeks I can’t afford my groceries” regularly. And I agree that they are doing it tough. Things are expensive and some people sadly weren’t privy to the education that covered money, investment and managing finances. But everything is relative and I think that some things need to be considered before we go labelling ourselves as hard done by the cost of living.
Deutsche Bank, in its fourth annual Mapping the World’s Prices report found Australia to be the country with the highest cost of living. This was based on a myriad of factors including transport costs, dining out costs, the cost of a pair of Levi jeans, the cost of beer, the cost of a big mac and the cost of one night in a five star hotel amongst many others. So the data is collected from a wide range of factors.
But there are also some things that we need to remember.
Firstly, you can’t compare apples with oranges. You can only compare apples with apples and on a worldwide scale that becomes very difficult. The report concludes that what an American can buy for US$1 would cost an Australian AU$1.12 by the time the appropriate conversions were done. However, this doesn’t account for the fact that the economy is different, our wage structures are different and our earnings are different.
In Australia, the average annual salary is AU$74,724. In America, the average annual salary is US$50,500 (at the time of writing this it is about AU$64,869.00). There’s a significant discrepancy there. So the different in prices for goods should also be considered as relative based on the percentage of income it costs and when you do that things become a little different. Australian’s only pay 90% of the relative cost of buying a Big Mac in the US making Australia cheaper than the states. Everything is relative once you factor in the earnings of each country.
Then there’s the crux of Australia’s financial problems. It’s the reason that average household debt sat at over $79,000 in 2013 and this is because Australians are lead to live an aspirational life. The “ideal” household has two cars, four mobile phones and two computers, a large house in the suburbs, holidays overseas, pets and regular paid for entertainment like eating out. And unfortunately the line between necessity and luxury is becoming quite blurred.
So the surfacing of reports like this often prompts when we complain about the cost of living in Australia, as, perhaps we should take a moment to think about things with a little perspective.
Are we really hard done by the cost of living in Australia? Or is it our style of living that is the problem?
Share your thoughts in the comments below…