stuartsummers1980

Interesting to read various threads from people about how you shouldn't use the 1.5 exchange rate when working out whether your future Aus salary is high enough (and mods apologies if I should have tagged this on to another thread rather than starting a new one), but could anyone in the know (ie done the transition or purely just have an opinion) tell me if they think I should still be using a multiple as high as 2.2 when I'm moving from cities which are fairly similar on their cost of living? I'd have thought in my case I literally should use 1.5 but really interested to hear people's thoughts as to why that isn't the case if they disagree, and if so what should be a more accurate multiple specific to the cities I'm moving between. I know it's not an exact science and everyone leads different lives, but keen to get an idea. Just for background as its obviously relevant, we're a couple with no kids etc. Thanks!

Sherlock Holmes

The current exchange rate is unnaturally low because perceptions are (and possibly the reality is) that England is doing badly and Oz is doing well.

In more normal times, a rate of 2.2 would be a reasonable average exchange rate moving between 2.00 and 2.40.

If earning £40,000 in the UK I think you would find $80,000 not quite enough. Certainly, $60,000 would not be. $90,000 would be better.

I think you do need on the salary scale to be looking at least 2.2.

All IMHO of course.

stuartsummers1980

That's intriguing. We're on combined salaries of £90k in London so what you're saying is although we lead comfortable lives in London, were we to earn the x1.5 equivalent of that in Aus $'s namely $135k combined, we'd struggle to lead a like for like lifestyle in Melbourne? I'm both intrigued and confused (albeit possibly just from lack of knowledge) as to how that would be?

Sherlock Holmes

I think yes, to maintain the identical standard of living, to have the same amount of disposable income you'd need to look at a factor of at least two.

That said, you could survive on $135k quite easily.

I live out in the never never now and live quite happily on next to nothing.

Hopefully some Melbourne dwellers will give you more opinions / advice. I think most of them are in bed at the moment.

Bermudashorts

The current exchange rate is only relevant to tourists and with regard to moving capital over and initial set up costs before you start earning in AUD.

If you want to estimate what salary would provide a comparable standard of living then you need to assume a factor of around the 2.2, or maybe a bit more or maybe a bit less. But to assume that 1.5 would provide the same standard of living is a big mistake. This is because if you apply it to your income you would need to apply it to your expenses and everything would seem extremely expensive if you converted at 1.5.

Is it possible to manage on 135k? Well of course, but that is not the question. £90k is nothing like 135k in Australia. In financial terms the person on £90 in London would be hugely better off than the person in Melbourne on 135k.

chris955

You certainly wouldn't use the current 1.5 as a comparison because you would notice a huge drop in lifestyle. For many years I have used $2 to £1 to compare like for like and I think that is still accurate to a degree but with the cost of food, utilities etc rising fast 2.2 might be the way to go. If you are on
£90k now I would be looking at at least $200k.

Max&Ozzy

I struggle to comprehend the apparent challenge some will face with their new $$ income when talked about in annual salaries alone. Maybe if we highlighted something more mundane it would help show the price variance and what then they'd need to have in the hip pocket to cover it.

Not housing though, which if you have a mortgage, would consume a great deal of the salary and the choice of house is so subjective.

How about a fillet steak, chips and salad. Nothing fancy at an acclaimed celeb chef venue, just a middle run establishment / bistro. I think they cost between $28 - $37, (on average in the $30's range) throughout most of the country. I came across a $58 one in Sydney and thought, humm! bit much.

How much in London??

Then have a think about the disposable income from projected $$ salary.

Rambi

Sounds like the underlying principle of burgernomics.

So what we need is someone to post the price of a Big Mac in Melbourne and London.

jad n rich

135k in OZ is not a high income, second income territory if you have a large mortage IMO. It may be high as in 'average wage' scale, but its highly taxed at that level and your not going to get the perks of family benefits etc that lower income earners would get. The govt has made that income level the scapegoat for its ills, levies, taxes, cutbacks that income+ is the one they target.

IF you want to live 20/30 mins from melb you are looking at huge housing costs, to buy or rent if your thinking nice house. $600 rent or 1m for a house wouldnt get you anything fancy. Yes there is cheaper stuff but my suggestion is to actually look at it What looks great on the net is IME often a dump

Rambi

$135k has a lower tax take than £90k

However I would not say they are equivalent. I reckon the London to Melbourne conversion is around 2:1, so $180k would be about equivalent (which still has a lower tax take than £90k).

jad n rich

We wandered around brisbane mall the other saturday evening and steak and chips ranged from $27 - to $42 Not some fancy cut , looked very basic to me. The majority were the $37 - 42. Rip off IMO.

We dined in Hungry jacks, The burger I had was $6.95. The others had some combo, $8.95 each. Was disgusting too, fat oozing out and sugary buns, delish

You can get cheaper meals in RSL clubs etc, but its subsidised by have to sit and watch the desperate stick their life savings or kids lunch money in the pokies. No thanks.

jad n rich

Whats the tax on them. Would be interesting.

Rambi

$180k
Medicare Levy: 2,700
Flood Levy: 1,050
Income Tax: 54,550
Net Income: 121,700 (67.6%)

£90k
Tax: 26,010
NI: 5,181
Net Income: 58,809 (65.3%)

fish.01

Exchange rates have little to do with cost of living comparisons.

Say for example an apple cost me 5% of my salary in Australia. What if the next day the pound bombed and the exchange rate against the AUD was cut in half...and on the same day the Swiss franc strengthened against the AUD.

So what has happened, has the cost living gone up in Australia because the pound stirling bombed, or has it gone down because the Swiss franc strengthened against the Aussie dollar.

Of course neither of those things has affected the cost of living for an Australian. The apple still costs 5% of my salary.

The only way to approximate cost of living differences between two countries is to look at what percentage each item takes of an average salary. To make this calculation easier someone worked out that 2.2 was the difference between the average salaries is the uk and Australia. So 2.2 is not some quasi replacement exchange rate, it is just a mathematical short hand to convert a uk price to the 'average salary equivalent' in Australia.

BadgeIsBack

This is always the case, and it's a line I have always taken - at one time in a distinct minority in a sea of voices talking about FX rates. However, there is nothing to stop migrants from arriving at arbitary figures to arrive at eqivalent 'purchasing power' and the forum average guess of 2.2 is better than the FX rate, and infact I'd suggest 2.5 -3 (at one time the FX rate anyhow) if we are putting numbers on it.

I also suggest people do the exercise with their personal expected incomes, not with averages, across several jobs they could expect to be employed in.

And relevant to people paid in pounds, as I am often the first to forget!