Australian cities rank high in Mercer cost of living survey, By Tracey Vale

Recent spiralling housing costs, rate hikes and increased bank rates are just the tip of the iceberg when considering the recent pressures put on Australian families. Diana Mathew, of The Money Tree, says “Re-addressing the household budget to include a savings plan, has become essential to combat these rising costs”.

Australian cities ranked high in the Mercer worldwide cost of living survey in 2010, with the cost of living set to outpace inflation—a major problem for middle-income Australia. In 2011, Australian cities have ranked even higher.

With the major contributor to increased costs coming from housing, other expenses have stemmed from increases in power costs, water, council rates, communication, education, fuel, groceries, transport and entertainment.

“With Australian cities such as Sydney and Melbourne ranking as considerably more expensive than New York, London, Milan and Paris, and with the added housing pressures, it is critical that middle-income Australia can manage their budgets effectively to ease the burden,” said Mathew.

A key to this, she says, is combating inflation. Prepare your budget with a savings plan in mind.

“If you are not saving then you are merely working to pay your bills,” said Mathews. A savings plan of 10 percent of your income, coupled with compound interest, will add up to a considerable nest egg. “With even smarter investing, it could easily be increased tenfold!”

“Smart savers will be asking about the effect of inflation and how they can counteract it,” she said. To do this, keep an eye on the Consumer Price Index (CPI).

“If your wage doesn’t increase during an extended period of inflation, you will need to increase your percentage of savings to keep pace with the CPI.”

The 2011 Mercer Cost of Living Survey is the worlds most comprehensive and uses New York as its base, comparative city. While New York is ranked at 32, Sydney has risen 10 places to sit at the fourteenth most expensive city in the world, out of 214 surveyed.

Melbourne has risen to 21, Perth, 30—a rise of 30 places since 2010; Brisbane, 31; and Canberra, 34—a rise of 40.

Adelaide moved up 44 places—the country’s biggest increase—to 46.

“In addition to the strengthening of the currency, a dramatic increase in rental prices has also pushed Australian cities up the ranking, especially in Adelaide where market supply is extremely low,” said Nathalie Constantin-Mĕtral, Senior Researcher at Mercer.