Australian cities have fallen in a new ranking of the cost of living in global cities.
The Economist Intelligence Unit Cost of Living survey showed Sydney dropped out of the top 10 and fell six spots to 16th place, while Melbourne dropped eight spots to 22nd.
Brisbane’s rank fell 15 placed to 41st, while Adelaide came in at 51st and Perth 64th.
The survey has given the title of the world’s most expensive city to three places: Singapore, Hong Kong and Paris.
Simon Baptist, chief economist at the Economist Intelligence Unit, said while Australian cities still do rank amongst some of the most expensive in the world, in an international context the cost of living in Australia has come down in the last few years.
“The survey compares prices across 160 products and services – like the cost of bread, and a women’s haircut – to determine the overall cost of living,” Baptist told Trading Day.
Cost of living in cities was tracked using New York prices as a base.
“The bigger drops are coming in Sydney and Melbourne…their cost of living compared to New York has fallen by 15 per cent, while in Adelaide, Perth and Brisbane its more like ten.”
The weak Australian dollar means goods that “are not tradable”, like haircuts, are now less costly.
“For example in our survey, we did find in Melbourne that the price of a men’s business suit has fallen in absolute terms over the last 12 months,” Baptist said.
Falling house prices in Australia are also having a flow-on effect on confidence and spending.
“When people feel wealthier and when their properties are going up in value, of course, they are more inclined to do things like spend on expensive restaurants.
“With property prices coming down, perhaps people are feeling less secure. I think we’ve seen demand for those kind of products fall a little bit.”
A surprising trend emerging from the survey results was a big increase in the cost of living across south-east Asia in cities like Ho Chi Min City and Kuala Lumpur.
“They are still cheap by global standards but have been rising quite rapidly up the rankings”
On the other hand, previously more expensive cities like those in Australia, New Zealand or China have been coming down in the last 12 months.
Is it a good or bad thing to fall down the rankings?
It’s neither, Baptist said.
Each city needs to be looked at in a broader context.
Despite being the most expensive city to live in, Singapore’s high cost of living actually offers some benefits.
“One reason Singapore is so expensive in our index is the cost of owning and operating a vehicle is very high.
“That makes it expensive but it also means we don’t have congestion or pollution from traffic.”
“So sometimes higher prices can lead to an improvement in the quality of life,” Baptist said.
A city with a high cost of living also indicates healthy levels of income.
“Cities that have higher income might have higher prices as well, but that supports an equivalent standard of living.
“In an international context, Australian salaries are particularly high so the quality of life in Australia given incomes and the cost of living is still pretty good.”