How To Compare Costs of Living: Philippines vs Australia
An important decision whenever you relocate is the comparative cost of living in your new home countries. If your salary doubles in a new location, but you cost of living triples, your purchasing power has of course decreased. Comparative purchasing power is a crucial thing that people need to consider when relocating.
There’s a range of websites where you can look up how much necessities and common bills like rent and utilities cost in the Philippines compared to Australia, but rather than doing item by item comparisons, simply understanding the reason for most of the differences will make the entire topic much clearer.
The key reason for the difference is wage levels. A white collar wage in the Philippines will generally be 10-20% of what it is in Australia. The discrepancy between retail/hospitality workers’ wages in the Philippines and Australia is even more pronounced, so much so that a retail worker might earn a month’s full time wage in the Philippines from a single 8 hour shift in Australia.
This labour arbitrage is what makes some occupations virtually non-existent in high labour cost countries such as Australia. It’s very rare to find a personal driver, or a live-in nanny or maid there, whilst they are a common occurrence in the Philippines. These roles that may cost AU$30,000-AU$40,000 (PHP1.2m-PHP1.6m) annually in Australia, instead cost just AU$1,200-AU$5,000 (PHP50,000-PHP150,000) in the Philippines.
This labour arbitrage is also what has created over a million jobs in the thriving Business Process Outsourcing (BPO) industry in the Philippines over the last 10-15 years.
Costs will differ most in the labour-intensive areas such as spas, domestic help, haircare, laundry, security, logistics and construction. So fast-food delivery, haircuts, massage, repairs and taxis are cheap, but manufactured goods, electricity, fuel and imports are not.
Tax is another difference, low taxes on cigarettes and alcohol in the Philippines means that you can get a packet of 20 for the cost of one cigarette in Australia, or a bucket of six beers at a bar, for half the cost of a single beer in Australia.
Rent is generally cheap, and of course follows supply and demand, and the three rules of real estate: location, location and location. Premium inner-city areas in key CBDs are more expensive than places in 2nd tier cities or in the provinces, and comparable properties are less than a third of what it would be in Melbourne or Sydney CBD. However, it’s very important to adjust your accommodation type to the local stock – in general houses are in short supply in Manila, and this has inflated the price, so you might want to adjust your lifestyle to local conditions to save money.
Likewise an imported Western grocery item can actually cost more than it would in Australia, but local cheese or beer can be almost as good for a fraction of the cost.
A numerical rule of thumb for salary comparisons is that how much you earn per month in the Philippines (in peso), will represent the quality of life you live in Australia in dollars annually. This is convenient as salaries are quoted per month in the Philippines, and per year in Australia.
So a PHP30,000(AU$750)/month salary in Manila would give you a similar quality of life as AU$30,000/year in a large Australian city. Likewise a PHP200,000(AU$5000)/month salary in Manila would allow you to live like someone earning AU$200,000/year in Melbourne or Sydney.
So if you’re currently living in Australia and considering the jump to live in the Philippines, either through finding a new job, passive income, retiring, online freelancing or telecommuting, you would need to earn around 30% of your Australian income to maintain the same quality of life.
A final factor is change, or rather three measures of change: price rises in PHP, in AU$ and in the exchange rate between the two. These are more significant with long stays, where gradual change can affect spending power.
There’s much more to life than dollars or pesos though, and the Philippines is a wonderful country, definitely worth exploring if you have never been over this way.
Author: Derek Stewart
Chart – http://www.indexmundi.com/xrates/image.aspx?c1=AUD&c2=PHP&days=180
Makati – http://fr.wikipedia.org/wiki/Makati
Plane – http://fr.wikipedia.org/wiki/Air_Philippines