The latest Xpatulator.com international cost of living comparison has found that Sydney, Australia is the 23rd most expensive city in the world for expatriates.
The findings of the international cost of living comparison of 228 international locations, conducted by the international relocation calculator, shows that Sydney is the 23rd most expensive city overall.
The Xpatulator.com international cost of living comparison uses the prices of goods and services that expatriates spend their salaries on in each location, and calculates cost of living indexes (COLI) for 13 different basket groups using New York as the base (i.e. New York is equal to 100).
The most expensive city in the world for expatriates is London with an overall COLI of 126.6. At the other end of the rankings, the least expensive city (again – for expatriates to live in) is Harare with an overall COLI of 16.4. This means that on average, goods and services that cost an expatriate US$100 in New York would cost US$126.6 in London, compared to just US$16.4 in Harare, and US101.73 in Sydney.
Sydney Cost of Living
For each aspect of cost of living Sydney is ranked by Xpatulator.com as follows (Out of 228 international locations, ranked from highest cost of living to lowest cost of living):
Expatriate Pay Approaches
Cost of living information is used by organisations to establish salary levels for expatriates undertaking international assignments. How the cost of living information is used depends on the pay methodology adopted by the organisation. There are 3 mainstream approaches to establishing salary levels for international assignments, the build-up approach, the salary purchasing power approach, and the cost of living allowance approach.
Salary Build-Up Approach
The build-up approach uses the expatriate’s home salary as the starting point and then builds up the salary package for an international assignment. Typical elements added to the salary are for cost of living differences, hardship differences and exchange rate. Hardship is the relative difference in the quality of living a person and their family are likely to experience.
For example a person earning AUD$100 000 in Sydney taking up an assignment in London would have the following build-up:
Base Salary AUD$100 000 X COLI X Hardship Premium X Exchange Rate = Assignment Package in UK Pounds.
Using Xpatulator.com, a person earning AUD$100 000 in Sydney, would earn an assignment package of UK Pounds £58 447.
Salary Purchasing Power Approach
The Salary purchasing power approach seeks to achieve parity between international locations. What would be the equivalent of a salary in Sydney in other places in the world in terms of purchasing power? We compared purchasing power by comparing salary levels adjusted for cost of living differences, and relative hardship using Xpatulator.com.
A salary of USD$50 000 in Sydney Australia is equivalent to:
This means that an organisation with a head office in Sydney, and international offices in each of the above locations would pay a position that is paid USD$50 000 in Sydney, USD$62 238 in London and USD$44 031 in Beijing in order to achieve the same salary purchasing power in each location.
Cost of Living Allowance (COLA) Approach
Organisations that make use of Cost of Living Allowances (COLA) use cost of living information to determine how much COLA to pay for international assignments. A COLA is an allowance paid to an expatriate to ensure that they are compensated where the cost of living is higher than their home country. Where the cost of living is lower, most organisations do not adjust the salary downwards, they would simply not pay a COLA in such cases. Using the example of a person earning US$50 000 in Sydney sent on an international assignment to London, they would be paid a COLA as follows:
USD$62 238 in London less USD$50 000 in Sydney = USD$12 238 COLA in London
The COLA is paid in addition to the individual’s current salary, for the duration of the international assignment, and is typically reviewed on an annual basis, or when the COLI changes by more than 10%.
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