Six Australian cities listed in Mercer’s Cost of Living Index 2018

20 July 2018

In the latest edition of consulting firm Mercer’s Cost of Living Index, all Australian cities have fallen in the rankings. Whilst this may have profound effects on attracting international talent, the authors of the report highlight the fact that this is due to other cities becoming more expensive, not Australian cities becoming cheaper.

The global consultancy has been conducting surveys on the quality of living in cities worldwide for over 20 years. Mercer, itself a wholly owned subsidiary of professional services firm Marsh & McLennan, then take the data generated from the survey and incorporate it into the Cost of Living Index.  

By evaluating and ranking cities worldwide in terms of cost, the index is a useful tool for governments and multinational companies to measure expat renumeration and international employee transfers. The index takes into account the price of accommodation based on the average rent an expat would pay as opposed to focusing on the price for locals.

Top 5 global cities for quality of living per region Mercer Index 2018

The worlds ten most expensive cities for expats are; Hong Kong, Tokyo, Zurich, Singapore, Seoul, Luanda (Angola) – which dropped from first place last year – Shanghai, N’djamena (Chad), Beijing and Bern (Switzerland). 

“With technology advances and the importance of a globally connected workforce, deploying talent remains a key component of a multinational’s business strategy,” said Ilya Bonic, President of Mercer’s Career business. 

“While a mobile workforce allows organisations to achieve greater efficiency, utilise top talent, and be cost effective with international projects, volatile markets and slowing economic growth in many parts of the world require them to carefully assess expatriate remuneration packages.”  

“Aligning workforce and mobility strategies by ensuring the right employees are in the right place is more critical than ever for multinationals as they focus on new global business models,” said Bonic. “And, properly compensating employees on international assignments is as important as it can be costly.” 

Top 10 and bottom 10 global cities for quality of living per region Mercer Index 2018

Sydney took the top Australian spot coming in at joint number 29 with Chinese city Tianjin, having dropped five spots since last year. With little doubt, Sydney is Australia’s most expensive city to live in, often being compared with Tokyo, London and New York. However, the ranking shows that for expats, Sydney is less expensive than Noumea, New Caledonia, Abidjan, Côte d’Ivoire and Tel Aviv, Israel. 

Ahead of Sydney in terms of affordability was Melbourne, Australia’s second most expensive city at number 58 on the index. Melbourne was considered as affordable as the Brazilian megacity São Paulo and was also surrounded by Munich, Germany, Washington, USA and Mumbai, India. Melbourne has long been seen as the more affordable Australian capital, and in this year’s ranking the city fell 12 positions.

Perth appeared next on the index at number 61 after having dropped 11 spots from the previous year. Perth was sandwiched between Miami, USA and Dakar, Senegal. Canberra and Brisbane followed with the respective placements of 77 and 84, and Adelaide brought up the rear with a score of 87. In terms of New Zealand, only Aukland and Wellington appeared on the list, placed 20 points apart at 81 and 101 respectively. 

“Cities in other countries moved up in the ranking, causing Australian cities to drop,” said Karla Costa, Mercer’s global mobility leader who is based in Sydney. “In general, cities that fall in the middle of the ranking are at greater risk of experiencing significant changes in their positions due to the movement of other cities.” 

Costa commented on what the drop in Australian cities on the index may mean in business terms; “Despite volatile global markets and growing security issues, organisations continue to leverage global expansion strategies to remain competitive.”Trends in costs of living, price of gasoline

“And with six of the top ten most expensive cities in Asia - Australian and New Zealand cities are looking far more attractive for businesses to send employees on international assignments, particularly those doing business in the Asia Pacific region.”

“Last week, I was in a conference with 150 clients – mostly in Europe,” she said in conclusion. “They said: We don’t have an issue sending people to Australia.”



Chinese investment into Australia plunges to eight-year low

09 April 2019

Chinese investment into Australia plunged to US$6.2 billion last year according to the latest KPMG analysis, down by more than 35 percent to an eight-year low. 

A study from global professional services firm KPMG in conjunction with The University of Sydney has found that Chinese investment into Australia dropped by 36.3 percent in 2018, despite Chinese outbound direct investment growing by 4.2 percent globally to nearly US$130 billion. Taking in mergers and acquisitions, joint ventures, and green-field projects, Chinese investment into Australia totaled US$6.2 billion in 2018, down from US$10 billion the previous year.

As part of an ongoing collaboration between the Big Four firm and Sydney Uni, the latest release in the ‘Demystifying Chinese Investment in Australia’ report series (now into its fifteenth edition) points to Chinese domestic policy changes for the decline, with the local downward rate of investment now coming into line with trends seen in the US and Canada, which last year recorded respective Chinese inbound investment drops of 83 percent and 47 percent (in USD terms).Value of Chinese ODI into US, Europe and Australia 2012-2018

Designed to reduce its international exposure, the policy measures being implemented in China since early 2017 require overseas investments by Chinese firms to be non-speculative, only undertaken after fully considering major potential risks, and consistent with the company’s strategy and the country’s socio‑economic development goals – with certain categories of investment encouraged and others prohibited or restricted.

With 80 percent of Chinese executives stating that it was more difficult to get capital out of China in 2018 compared with 65 percent the year prior, the result is the second-lowest Chinese inbound investment in Australia since the mining & gas driven investment peak of 2008, with over US$16 billion coming into the country. Outside of the US$3.9 billion figure in 2010, the investment sum hasn’t dipped below US$8 billion in a decade.Chinese investment into Australia - 2007 to 2018

Yet, despite the domestic policy measures and downturn in inbound investment, Australia is still seen as a relatively safe investment destination according to a cross-sector survey of Chinese executives, with an improving political climate (those cautious due to the local political debate dropped from 70 percent in 2017 to 59 percent last year) and slight increase in the sense of being welcomed – up three points to 38 percent, although those feeling ‘unwelcome’ also rose by four points to 19 percent.

“Whilst Chinese investors confirm they remain positive about many aspects of the Australian market and its prospects compared with many other countries, there is an increasing concern around transparency of regulations, high costs and their continued perception of being unwelcome as reflected by negative Australian media coverage.” the report states.  “We need to be aware of the very real impact that poorly received, politically motivated public discourse and unbalanced media coverage can have on the future level of Chinese capital entering Australia.”2018 Chinese investment into Australia by sector

As an investment breakdown, private Chinese companies accounted for 87 percent of the deal value in 2018 and over 92 percent of deal volume, with state-owned entities contributing only 13 percent of value and 8 percent of the volume – which in total, dropped by 28 percent from 102 transactions in 2017 to 74 last year. As per those deals, over 40 percent of the investment total was made in the Australian healthcare sector, a more than 110 percent increase on the prior year.

According to the analysts, Chinese investors are primarily interested in scalable medical services and healthcare products which can be scaled in their home market, and the Australian healthcare sector has gained increased interest due in part to the ‘Australia package’ – ‘the combination of transferable management know‑how, high‑level care service experience, state of the art technology, the ‘clean, green and healthy’ image of Australian products.”

Meanwhile, new mining investment has dropped sharply – down 90 percent from a spike last year for just 5.6 percent of the total – opening the door for commercial real estate (predominantly mixed-use development and office stock according to figures provided by Knight Frank) to claim the second highest levels of Chinese investment at ~37 percent (albeit down 31 percent on 2017 levels). The remaining deal value was mostly in oil & gas (8.8 percent, up 295 percent) and renewable energy (4.8 percent, up 217 percent) sectors.2018 Chinese investment into Australia by geography

Perhaps of further note, at least in terms of demystifying Chinese-Australian investment, ‘Northern Australia’ attracted at most just 8 percent of total investment, with Queensland accounting for only 5 percent, Western Australia 3 percent, and zero deals made in the Northern Territory. Here, the bulk of the inbound investment was made in New South Wales (56 percent) and Victoria (27 percent) with South Australia (8 percent) claiming the majority of the remainder.

“While this annual result brings Chinese ODI in Australia back to the second lowest level since 2008, there is no reason why Australia can’t return to higher levels seen historically,” the report concludes. “2018 need not define a trend, but it is a period to reflect upon. There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries and supply chains in the coming years and there is much that can be done to improve the perception of the Australian market to Chinese investors and vice versa.”