AUSTRALIA is one of the most expensive places in the world, according to a survey by the investment bank Deutsche Bank.
Aussies pay top dollar for beer, cigarettes, iPhones, hotel rooms, Levi Jeans, movie tickets, flowers - you name it.
But the news might not be as bad as you think.
It is inherently hard to compare the price of goods in different countries because there is so much local variation in the quality of the goods. How sure can we be that we are comparing apples with apples?
Beer for example, can be premium or standard. Deutsche Bank's survey found Australia was the third most expensive out of 17 countries surveyed to buy a pint of beer at an "average bar".
Read: Deutsche Bank survey found Australia was the third most expensive
It will depend very much if that bar is in the city or the suburbs, for example: Japan's most popular beer is Asahi Super Dry, but the because that is not a standard beer around the world, the survey measures the price of a Guinness or Kilkenny in a Japanese bar.
Why? Because these are the sorts of compromises researchers have to make when trying to compare prices across countries.
Again, when the researchers wanted to compare car prices, they had to pick a particular model and brand to compare. They picked the Volkswagon Golf. But the Golf is not sold in India, so the researchers took the price of a Polo and increased it by 34 per cent, which is the price difference in England between a Golf and a Polo. You can start to see how the figures might be open to error.
Even a Big Mac, as it turns out, is not always a Big Mac. In India, it is called a Maharaja Mac.
When it came to hotels, the researchers looked only at the price of 5 star hotels (we should all be so lucky) and Sydney emerged as the most expensive at $US933 a night.
At which hotel? According to the footnotes of the report, the researchers compared prices at the Hyatt Regency for one night's stay in mid November. November is getting into high season for tourism in Australia, while it is winter in the Northern Hemisphere. That could explain the high prices.
And anyway, savvy hotel bookers know that there are often websites that offer last minute deals and significant discounts. But researchers are unlikely to have investigated that for every country, using the rack rate only.
Make no mistake, the report is a rich source of information about prices in more than 50 countries. Much of it came from a website called expatistan.com.au - a website where people intending to move countries can pay $29 for a report to show them the different in the cost of living and use this information to bargain for a pay increase.
It works by having users upload information on prices of taxi fares, Big Macs etc in their home town. According to the website, it has around 614,000 prices entered by 155,500 users in 1,478 cities. That's a lot. But it's far from perfect. You don't know if people have paid a discounted price or a ticket price. It is open to human error.
To compare prices across the board, the researchers take prices in local prices and translate them into one currency - in this case the US dollar - at current exchange rates.
And here I come to my next alarm bell. The dollar.
Everyone knows that the Australian dollar has been very strong recently, having doubled in value against the US greenback over the last decade.
Australia is a very expensive place for foreigners to come to at the moment and this shows up in surveys like the Deutsche Bank survey.
But for Aussies living here, earning Aussie dollars, buying Aussie products with Aussie currency, it doesn't make a difference. And we we get a great benefit if we do take those Aussie dollars and go buy products in foreign currencies.
So you have to take such surveys with a pinch of salt.
But having said all that, it does appear true that Australia IS a relatively expensive place to live.
The main trade off is that we are also a high wage country. There is a reason why India is the cheapest country for many products - wages are very low in India.
High wages are a cost to business that must be passed on to customers as higher prices. Businesses in Australia also pay high commercial rents thanks to planning restrictions and the high cost of land.
And the tyranny of distance has not gone away - it is more expensive to ship goods to Australia and then to transport them around this vast land of ours.
Still, it could be worse.
The pace of price inflation has, in fact, slowed since the global financial crisis.
The higher dollar has helped us to import cheaper goods, putting a lid on prices. Prices have gone up a lot on some domestically produced items, like electricity and gas. And anything that is made by Australians, like education services, health care, hair cuts and restaurant meals are more expensive because of wage rises.
Being a high wage, high cost country is not a bad thing. When you pay a high price, you're paying the wages of someone who will go off and buy something that pays the wages of someone else, maybe even yours. And so the economy goes round and round.
The main problem with being expensive is not for us, but that we have become an expensive place for foreigners to visit and for foreign businesses to buy our exports.
We need to make sure that we are producing products of sufficiently high quality to justify the price, or foreign customers will go elsewhere.
What we pay
$US2042: Cost of a basic health insurance policy in Australia, cheaper than the US, but more expensive than all 16 other countries surveyed.
$US28: Cost of a standard men's haircut in Australia. India has the cheapest cuts at $US3.19 and Tokyo the most expensive at $US44.57.
$US17: Cost of a pack of Marlboro cigarettes in Australia - the most expensive ciggies in the world.Manilla is the cheapest place to buy cigarettes at $US1.10 a pack.
$US17: Cost of a movie ticket in Australia, one of the most expensive tickets in the world. Cheapest is Mumbai at $US3.93 per movie.
$US38,500: Cost of a new Volkswagen Golf 2.0 TDI with no extras in Australia. In New Delhi you pay just $US18,577 but in Singapore you pay $US110,381.
$US139: Cost of a bouquet of 12 classic red roses delivered to your loved one's door step in Australia - the most expensive place in the world to make such a gesture.
$US116: Cost of a pair of Levis 501 jeans in Australia, the third most expensive after Moscow and Paris.
$US70: Cost of a pair of Adidas Super Star 2 sports shoes in Australia - the third cheapest in the world after China ($US50) and India ($US64)
$US8.20: Cost of a pint of beer served in a bar Australia - the third most expensive in the world after France and Singapore.
$US3.55: Cost of a 2 litre bottle of Coca Cola in Australia - the most expensive Coke in the world.
Jessica Irvine is News Limited's National Economics Editor
Email: [email protected] Twitter: @Jess Irvine
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