Candygirl Posted January 11, 2013 Share Posted January 11, 2013 Could someone please explain to me why some members say to use the exchange rate 2.2 to the £1 when working out cost of living, house prices and wages etc. BTW, if there is anyone in the Eurozone, do you use a different exchange rate? Thanks in advance. Link to comment Share on other sites More sharing options...
lara24 Posted January 11, 2013 Share Posted January 11, 2013 It is because the cost of living, buying/renting a house etc are generally more expensive so if you earn £50,000 in the UK to have the equivalent lifestyle in Oz you should expect to need to earn approx 2.2 times that which is $110,000 rather than the exchange rate of 1.5 to the pound you would only expect to need to earn $75,000. Hope that makes sense if not do a search for some of The Ropey Hoff's threads as it has been discussed at length in the past. I haven't seen anything from the Hoff recently - is he ok?...anyone Link to comment Share on other sites More sharing options...
fifi69 Posted January 11, 2013 Share Posted January 11, 2013 CG although i havent looks for a while, before we left was 1e not more or less equal to £1 anyway. Sorry cant help with the 2.2 question, is it something to do with whatever your earning in the UK/Eurozone then you would need x 2.2 to be on a same footing. I dont know and i dont really care, i think im earning about the same as in the UK but having a much better life and lifstyle Link to comment Share on other sites More sharing options...
fifi69 Posted January 11, 2013 Share Posted January 11, 2013 It is because the cost of living, buying/renting a house etc are generally more expensive so if you earn £50,000 in the UK to have the equivalent lifestyle in Oz you should expect to need to earn approx 2.2 times that which is $110,000 rather than the exchange rate of 1.5 to the pound you would only expect to need to earn $75,000. Hope that makes sense if not do a search for some of The Ropey Hoff's threads as it has been discussed at length in the past. I haven't seen anything from the Hoff recently - is he ok?...anyone Hoff left PIO a bit back, not sure of the ins and outs of it but kinda got an idea why. I miss him Link to comment Share on other sites More sharing options...
Candygirl Posted January 11, 2013 Author Share Posted January 11, 2013 Thank You. Link to comment Share on other sites More sharing options...
Conniebygaslight Posted January 11, 2013 Share Posted January 11, 2013 It is because the cost of living, buying/renting a house etc are generally more expensive so if you earn £50,000 in the UK to have the equivalent lifestyle in Oz you should expect to need to earn approx 2.2 times that which is $110,000 rather than the exchange rate of 1.5 to the pound you would only expect to need to earn $75,000. Hope that makes sense if not do a search for some of The Ropey Hoff's threads as it has been discussed at length in the past. I haven't seen anything from the Hoff recently - is he ok?...anyone I've been thinking the same...where's Jim? Link to comment Share on other sites More sharing options...
lebourvellec Posted January 11, 2013 Share Posted January 11, 2013 2.2 is the old exchange rate, it was quite constant at this rate until the Banking Crash. Bit like comparing the Pound to the Euro at the current exchange rate, compared to how it sat for many years. For the Euro - maybe use about 1.6. Link to comment Share on other sites More sharing options...
Quoll Posted January 11, 2013 Share Posted January 11, 2013 [/b]I've been thinking the same...where's Jim? Hoff went off in a Huff (well, no not really, but he said he wanted a break) Link to comment Share on other sites More sharing options...
Quoll Posted January 11, 2013 Share Posted January 11, 2013 Huh, I lost one there. Ah well - if you consider that the average Aus salary is around $70k and the average UK salary is around $26,500 then you should be multiplying by something like 2.7 and I think that is probably more realistic than 2.2 TBH Link to comment Share on other sites More sharing options...
Rupert Posted January 11, 2013 Share Posted January 11, 2013 Could someone please explain to me why some members say to use the exchange rate 2.2 to the £1 when working out cost of living, house prices and wages etc. BTW, if there is anyone in the Eurozone, do you use a different exchange rate? Thanks in advance. It is closer to the long term average exchange rate of the two countries and for a long time the exchange rate could be used to approximate the relative prices of things e.g. if it cost GBP 1 then it would cost AUD 2.2 (really anything from 2.0-2.5), broadly speaking. When the AUD dollar got stronger in the last few years, the price of milk and stuff did not drop accordingly in Australia, and why would it, the GBP exchange rate is irrelevant to Aussies and the price of their milk. And so current exchange rates are not a good way to gauge cosst of living and people typically refer to something in the 2 -2.5 bracket, 2.2 being just about in the middle. I think if you picked up an average basket of groceries in both countries, you would find that the GBP and AUD prices would reflect this more or less. If expenses are at about this rate then you would want your salary to be as well. Link to comment Share on other sites More sharing options...
fish.01 Posted January 11, 2013 Share Posted January 11, 2013 The 2.2 is not to do with historical exchange rates or anything like that. It also didn't come by estimating how much more or less things cost. Someone simply divided the average salary in Australia (in $) by the average salary in the UK (in pounds). As quoll said this is changing year to year so could do with adjustment though you have to be very careful to compare like for like figures as there are many type of averages published. The reason this was done was because when people want to compare salaries and living costs (how much money do i need/is daily life cheaper here or there) they often use the exchange rate. Unfortunately this is mathematically useless for comparing this. The exchange rate is only useful for a few things like initial moving/setup costs when still spending pounds or if you live in one country and get income from another. The trick is to work out what percentage of your salary you spend on something in each country....eg 46inch tv costs 1% of my wage there or 1.5% here. This is very hard to work out so the average salary equation (ie 2.2) gives you a rough approximation of how to convert money taking into account the different average salary numbers. if you're not sure why every time you convert cost of living/salaries using the 1.5 exchange rate you should stop yourself...think of the following: When the pound devalued dramatically over the last few years (2.5->1.5) this had absolutely no affect on the percentage of their salary a Brit or Australian spent buying a litre of milk. But if you compared using exchange rates it would appear that buying milk suddenly got way more expensive in Australia because of something that happened in Britain. Just silly. And conversely it would appear to an Australian looking the other way that British milk got far cheaper for a Brit to buy. Both of these conclusions are obviously untrue. To further demonstrate the craziness of using exchange rates, consider that a 3rd countries currency could have strengthened against the Australian dollar at the same time. So at the same time people in Britain are saying Australian's cost of living got dearer because of something that happened in Britain the people in the other country are saying Australian's cost of living got cheaper because of something that happened in their country. Meanwhile, in Australia, the people could be carrying on spending exactly the same percentage of their salary as before. Link to comment Share on other sites More sharing options...
VERYSTORMY Posted January 11, 2013 Share Posted January 11, 2013 It also depends on where in Oz you will be living and your lifestyle as somethings in Oz are a LOT more expensive. For example, we like eating out a fair bit. In Oz, that means a lot of $$$. So we estimate that the cost of living from pound to dollar is x2.5 - 3. A few of the young guys i work with you like spending a lot of time in the trendier bars find it is x3 or more. Others, with families might find its 2.2 Link to comment Share on other sites More sharing options...
fish.01 Posted January 11, 2013 Share Posted January 11, 2013 It also depends on where in Oz you will be living and your lifestyle as somethings in Oz are a LOT more expensive. For example, we like eating out a fair bit. In Oz, that means a lot of $$$. So we estimate that the cost of living from pound to dollar is x2.5 - 3. A few of the young guys i work with you like spending a lot of time in the trendier bars find it is x3 or more. Others, with families might find its 2.2 We eat out a fair amount in Brisbane but know plenty of cheap places so as you say it depends where you live/what you do. My (english) wife had a lovely roast with yorkshire puds with her friends for the equivalent of £4.50 last weekend. It reminds something I should have added is that the average salary equation is a country wide average. If moving from a small UK town to Sydney it should be adjusted accordingly. Link to comment Share on other sites More sharing options...
Flathead Posted January 11, 2013 Share Posted January 11, 2013 We eat out a lot in Brisbane but know plenty of cheap places so as you say it depends what you do. My wife had a lovely roast with yorkshire puds for the equivalent of £4.50 last weekend. It reminds something I should have added is that the average salary equation is a country wide average. If moving from a small UK town to Sydney it should be adjusted accordingly. I know plenty of cheap places....I would not want to eat in them.....some of the expensive places are bad enough Link to comment Share on other sites More sharing options...
fish.01 Posted January 11, 2013 Share Posted January 11, 2013 I know plenty of cheap places....I would not want to eat in them.....some of the expensive places are bad enough Lots of nice cheap places near me. Can imagine out on the bayside might be a bit more of a struggle. Of course I'm not talking fine dining if that's all you do Link to comment Share on other sites More sharing options...
Flathead Posted January 11, 2013 Share Posted January 11, 2013 Lots of nice cheap places near me. Can imagine out on the bayside might be a bit more of a struggle. Of course I'm not talking fine dining if that's all you do I lived in Toowong for a few a few years.......that is pretty central Link to comment Share on other sites More sharing options...
fish.01 Posted January 11, 2013 Share Posted January 11, 2013 I lived in Toowong for a few a few years.......that is pretty central Yeah, I remember...I'll drag you away from those race courses one day and show you some places. Link to comment Share on other sites More sharing options...
Flathead Posted January 11, 2013 Share Posted January 11, 2013 Yeah, I remember...I'll drag you away from those race courses one day and show you some places. :laugh: Link to comment Share on other sites More sharing options...
Rupert Posted January 11, 2013 Share Posted January 11, 2013 The 2.2 is not to do with historical exchange rates or anything like that. It also didn't come by estimating how much more or less things cost. Someone simply divided the average salary in Australia (in $) by the average salary in the UK (in pounds). You know this for a fact? You know exactly where the source came from. Of course it is not coincidence that this is close to the long term historical average. What does it matter what the source is anyway... Link to comment Share on other sites More sharing options...
fish.01 Posted January 11, 2013 Share Posted January 11, 2013 You know this for a fact? You know exactly where the source came from. Of course it is not coincidence that this is close to the long term historical average. What does it matter what the source is anyway... Yes I was on the forum when it was done - I may have even been the one who did it and it might have been the "other" forum...I can't remember - and it was discussed a lot. Agreed, the source doesn't matter, I just want to clear up how it is calculated and why...it is the average salary theory behind it that matters. Death to exchange rates Link to comment Share on other sites More sharing options...
lebourvellec Posted January 12, 2013 Share Posted January 12, 2013 Yes I was on the forum when it was done - I may have even been the one who did it and it might have been the "other" forum...I can't remember - and it was discussed a lot. Agreed, the source doesn't matter, I just want to clear up how it is calculated and why...it is the average salary theory behind it that matters. Death to exchange rates . Funny how it was you on another forum that said this. Link to comment Share on other sites More sharing options...
Rupert Posted January 12, 2013 Share Posted January 12, 2013 Yes I was on the forum when it was done - I may have even been the one who did it and it might have been the "other" forum...I can't remember - and it was discussed a lot. Agreed, the source doesn't matter, I just want to clear up how it is calculated and why...it is the average salary theory behind it that matters. Death to exchange rates I went to Italy in 1998, I noticed that everything I bought cost a couple of thousands times more in Italian currency units than in GBP units. I thought it was something to do with the 1:2000 exchange rate. Oh silly me for not realising that it was *nothing* to do with the exchange rate but was to do with dividing respective average salaries (which also presumably have nothing to do with the exchange rate). Honestly Fish, you do not seriously think that you are the first person in the world to think about prices and salaries and exchange rates do you. These things are not linked by coincidence. Anyway at least we are agreed that the 2.2 is a decent rul eof thumb. Link to comment Share on other sites More sharing options...
Guest chris955 Posted January 12, 2013 Share Posted January 12, 2013 You know this for a fact? You know exactly where the source came from. Of course it is not coincidence that this is close to the long term historical average. What does it matter what the source is anyway... Over the years of travelling to and from the UK and Australia we have always just used 2:1, we usually find if we earn £100 then we would earn roughly $200. I have seen people use rates anything from 1.5 to 3. 2:1 has always worked out to be accurate for us. Link to comment Share on other sites More sharing options...
Playghirl Posted January 12, 2013 Share Posted January 12, 2013 Poor old teachers salaries do not follow this ol rule, lol. Link to comment Share on other sites More sharing options...
VERYSTORMY Posted January 12, 2013 Share Posted January 12, 2013 We eat out a fair amount in Brisbane but know plenty of cheap places so as you say it depends where you live/what you do. My (english) wife had a lovely roast with yorkshire puds with her friends for the equivalent of £4.50 last weekend. It reminds something I should have added is that the average salary equation is a country wide average. If moving from a small UK town to Sydney it should be adjusted accordingly. Not necessarily "fine dining", though which we do like and is hugely more expensive in Oz. But also a lot of the more casual places such as Must in Perth or something similar. I have posted on here before what that can cost in Perth and its not pretty. But, for example, i can eat at Ceviche in central london. A very cool little place with food that has been raved about by every critic and pay about 40 pounds for 2. Thats $61. You wont get very much for that in Perth. Link to comment Share on other sites More sharing options...
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