Australia is very popular with US expats who are looking to start a new life in a foreign land where the weather is good, prospects are encouraging and the standard of living is comparable to their former homeland. However, with prosperity comes a price with the cost of living in Australia having been on the increase since around the turn of the century and the difference between the cost of living in America and the cost of living in Australia seemingly growing all of the time – but is this really the case?
So what are the main factors to consider when comparing the cost of living in Australia to the cost of living in America?
One of the main factors you need to consider when moving to a foreign land is the cost of property whether you are looking to rent or you are looking to buy. Even though the trend of renting your home rather than buying it outright is still evident in America we have seen more and more US citizens acquire their properties. After peaking at around US$322,000 in the first quarter of 2007 the cost of the average home in America is now around US$269,000. However, it is a difficult to compare and contrast against the Australian property market due in the main to the massive divergences in price and quality of housing!
If you take the largest cities in Australia the average price of a property has increased from AUS$371,000 to around AUS$381,000 over the last year, a year which has seen perhaps the worst economic environment since the 1920s. Indeed many of Australia’s largest cities are seeing houses sell for well over AUS$1 million and there is a feeling that only the rich will be able to live in areas such as Sydney, Adelaide, Canberra, Melbourne and Brisbane, to name but a few, in the future. At the moment property prices compare very well to America but this may well change in the future.
Australia has a taxation system which is very similar to that in the UK and compares relatively unfavourably to that in the US. However, the American system includes a federal tax rate and local taxes which can often vary wildly from state to state. There are also other issues to take into account such as healthcare which is state funded in Australia via a 1.5% tax levy while in the US there is no real comparable state healthcare system and private healthcare is being pushed on to the population.
However, it is also worth noting that the relative shortage of skilled workers in Australia has created a situation whereby incomes relative to the cost of living are rising in Australia compared to America which is giving those moving from the US the potential of a higher standard of living. It is worthwhile noting that again this can vary significantly depending upon employment skills and the area of the country in which you decide to live. At the moment the local spending power of citizens in the US and Australia is fairly similar but Australia is certainly on the ascendency.
Food and Drink
It is well-known that America has a relatively low cost of food and other essential items and this is no different when compared to Australia. When you consider that food in Australia can cost up to 2.5 times the cost of similar items in the UK and can be even more expensive compared to the US you begin to get a feel for the difference in the cost of living. However it must be said that the cost of the food you buy in Australia will depend upon the type of lifestyle you are looking to create for yourself and your income.
If you look at for example the cost of eating in a restaurant in America compared to the cost of eating in a restaurant in Australia it is markedly cheaper in America. The price of beer is also cheaper in America as is the cost of the likes of Coke/Pepsi and water. Again, it will depend upon where you visit for your meal but on the whole it is becoming more and more apparent that Australia can be significantly more expensive in many areas.
While in some cases it is difficult to compare like-for-like, on the whole it has to be said that food in Australia is more expensive than the equivalent products in the US.
As we touched on above, the cost of health care in Australia compared to the cost of health care in the US is very different. The Australian system is very similar to the UK NHS system whereby a 1.5% levy is charged on employment income to fund a state wide free health care system. This is at odds with the US system which is very much based on private health care, although changes are being made at the moment.
Even after the proposed changes to the US healthcare system it will still be more expensive to obtain health care in America compared to Australia. Whether the Australian government moves towards a private healthcare system in the future, or at least encourages some to make the switch, remains to be seen because the ever-growing population is placing more and more pressure upon government budgets.
The US has been renowned for many years as a relatively cheap country to live in and this becomes more and more apparent when you compare the current cost of living in Australia to the current cost of living in the US. Even after you discount the wild swings in the currency exchange rates the cost of living in America is still significantly lower than that of living in Australia. However, we also need to consider the benefits of living in Australia and the prospects for the Australian economy.
There is no doubt that Australia is a country which has grown significantly over the last 20 years with many people believing the best may still be yet to come. The population has quadrupled since the First World War, predominantly because of a fairly relaxed immigration policy, and the continuing influx of skilled workers is having a beneficial impact on the overall Australian economy. On the downside, the influx of foreign workers attracting relatively high incomes has placed pressure on the property market and prices have risen substantially since 2000.
You need to balance the cost of living in Australia against the cost of living in America while also take into account the standard of living, the weather, prospects for the future, healthcare and other everyday issues. Only then will you be able to ultimately decide whether a move to Australia from the US would be beneficial to your lifestyle, your employment prospects and ultimately your overall cost of living and level of disposable income.