New global rankings increase investor appeal of Australia’s lifestyle cities
22 Jun 2020
The cost of living for expatriates has fallen sharply in Australia's largest cities, according to Mercer's 2020 Cost of Living Survey.
Released this month, the survey's findings are important for Australia’s global investors. With a lower cost of living, Australian cities become more attractive to multinational companies looking expand into Australia – or to create a spring board into the Asia-Pacific region.
A low cost of living is also vital for attracting entrepreneurs. For example, Australia hosts hundreds of tech companies – approximately 800 in fintech, 350 in edtech, 500 in medtech and 400 in medtech. Most of these are startups and scaleups. With low comparative living costs, our lifestyle cities are better equipped to attract global talent to our shores, including companies with low initial headcounts.
A vital moment in our investor-friendly history
The rankings are good news at the right time. The start of 2020 has brought enormous challenges for Australia, with natural disasters and the coronavirus outbreak impacting trade, travel and international education. Fortunately, we have several positive factors on our side: the stability of Australia's economy; the successful containment of COVID-19; and the continued appeal of our state capitals. Together, these factors help make our economy resilient.
And this core resilience should not be understated. Australia’s economic growth has averaged 3.2 per cent since 1992. And while the Australian dollar has fluctuated during the past three decades, its current low level now plays a helpful role in keeping our comparative cost-of-living low.
All state capitals increase their appeal
According to the June 2020 rankings, Sydney fell 16 places to number 66 in 2020, offering the best value for money for expatriates in the world and in the Asia-Pacific region. Compared to ten years ago – when Sydney sat within the top ten – foreign companies experience have a lot more leeway in setting salaries and attracting employees from the global talent pool.
Other Australian significant cities have also experienced significant declines. Melbourne (99th) fell 20 spots while Perth (104th) was down 17 places. Brisbane and Adelaide dropped 23 and 17 spots respectively to an equal rank of the 126th position in the world.
Hong Kong retains top spot for expats
Hong Kong remains the most expensive city for expatriates both in Asia and globally. Tokyo and Zurich are now ranked in the third and fourth positions, respectively. Singapore now ranks fifth, down two places from last year.
Hong Kong kept its top spot owing to its currency peg with the US dollar. This meant the Hong Kong dollar strengthened against most major currencies over the past year, which in turn drove up the local cost of living. Similarly, the appreciation of the US dollar drove up prices for expatriates in US cities, including New York City, which climbed three places to sixth.
Ashgabat in Turkmenistan is the world's second most expensive city for overseas workers. This is mainly attributable to the country's economic problems. The economy faces an ongoing financial crisis, escalating food prices and severe inflation (average inflation of about 13 per cent a year in both 2018 and 2019).
Zurich, Bern, and Geneva are Europe's most expensive cities, in fourth, eighth, and ninth place, respectively. Zurich edged one place higher, while Bern and Geneva both jumped four places.
London up; Paris and Frankfurt down
The survey found that UK’s decision to leave the European Union has not seriously impacted Sterling. The British pound remains strong and it gained in value against all major global currencies during 2019. This impacted UK’s cost of living rankings. London rose four places to rank 19 globally, followed by Birmingham, which surged six spots to 129.
Conversely, the weakening Euro has pushed many European cities down in global rankings, according to Mercer. Milan (47th), Paris (50th), and Frankfurt (76th) all fell in the 2020 survey.
Mercer’s Cost of Living Survey, 2020
Note: Mercer’s data was collected in March; price variances in many locations were not significant due to the pandemic. Due to timing of the COVID-19 outbreak, Mercer conducted further analysis on availability of goods in April and May to verify pricing.
Source: Mercer’s Cost of Living Survey, 2020 (Released 9 June, 2020)
A guide for foreign investors
Mercer's annual survey is one of the world's most comprehensive cost-of-living measures. It is designed to help multinational companies and governments determine compensation allowances for their expatriate employees.
The 2020 ranking included 209 cities across five continents. It measured the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment, with New York City as the base city for all comparisons.