A common conversation I have had since I arrived in England a little over a month ago, is how surprised I am at the fact that nearly everything here is significantly cheaper than in Australia (except transport costs- public transport and fuel). When it comes to groceries though – necessities and treats, my experience of prices so far are so very strongly in the UK’s favour, that it is becoming very hard for me to justify living in Australia any more.
So I logged in to two supermarket giants here in the UK, and compared prices with Coles and Woolworths, and this is what I got:
|Gala Apples, Loose (kg)||$4.35||$2.63||$4.97||$5.48|
|Closed Cup Mushrooms, Loose (kg)||$4.50||$4.18||$11.96||$10.48|
|Brown Onions Class 2, Loose (kg)||$1.49||$1.46||$1.88||$2.48|
|Bacon (best / kg)||$8.73||$8.73||$9.90||$8.01|
|Lamb Leg (roast)||$12.04||$15.03||$13.48||$14.00|
|Cheapest pasta (kg)||$0.96||$0.96||$1.20||$1.20|
From this small sample, it is immediately clear how badly australia is competing, and it would be easy to continue comparing prices like this and continue the trend. I was even trying to pick products which Australia should fare better with – meats and grain based products should be abundant in our giant agricultural country! And yet the UK was cheaper on every front.
Here is the averaged results:
|Actual Exchange Rate|
|Item||UK Average||Aus Average|
|Gala Apples, Loose (kg)||$3.49||$5.23|
|Closed Cup Mushrooms, Loose (kg)||$4.34||$11.22|
|Brown Onions Class 2, Loose (kg)||$1.47||$2.18|
|Bacon (best / kg)||$8.73||$8.96|
|Lamb Leg (roast)||$13.53||$13.74|
|Cheapest pasta (kg)||$0.96||$1.20|
You can also see the current exchange rate used to calculate the AUD value of the GBP purchase price (from XE.com). The UK is cheaper, often times significantly, in every single product compared.
To be fair, the AUD is at the strongest it has ever been. It has doubled in value compared to the UK over the past 10 years and if we were to use an exchange rate of 3.0 dollars to the pound, then we would have all but one of the above products cheaper in Australia (mushrooms are way over priced in Aus!). So to give the benfit of the doubt, and assume that our grocery prices are simply on a delay with respect to our dollars value, lets compare the prices with an assume dexchange rate of 2.5 and 2.0:
|Gala Apples, Loose (kg)||$5.80||$5.23||$4.64||$5.23|
|Closed Cup Mushrooms, Loose (kg)||$7.21||$11.22||$5.77||$11.22|
|Brown Onions Class 2, Loose (kg)||$2.45||$2.18||$1.96||$2.18|
|Bacon (best / kg)||$14.50||$8.96||$11.60||$8.96|
|Lamb Leg (roast)||$22.49||$13.74||$17.99||$13.74|
|Cheapest pasta (kg)||$1.60||$1.20||$1.28||$1.20|
2.5 is probably an acceptable average value for the AUD to GBP, and hovered around that value for quite a long time – but hasn’t really been there for the past four years or so. While 2 was seen about 2 years ago as the value surged straight past it to our current 1.5 position. When you accept the value of 2, then we get costs more in line with what you would expect – Meat and grain products are still cheaper in Aus, but other things are cheaper in the UK.
OK, I have managed to do, what I so often do when trying to research ideas – managed to investigate far enough to disprove my own position. Yay.
Let me explain. My thoughts were that Australia was ripping us all off, charging way too much for every day products etc, when they should be much cheaper – and simply comparing the prices in the UK vs the AUS prices ‘clearly shows that’ – BUT, when you take the time to consider that the AUD has only been at 1.50 very recently, and only for the last couple of years, you cannot expect all of our grocery prices to be set so as to reflect this strength! It takes time for the benefits of a strong currency to somehow filter through to the farmers, the transporters and the other involved businesses so that they can lower their prices (or perhaps more accurately, so that the rest of the worlds prices can catch up with our new value).
Basically, what I am really noticing is that “The AUD is strong at the moment – now is a good time to take advantage of that”. No shit huh? If the dollar was to retrace back to an exchange of 2.0, then suddenly my whole perspective of “Australia is expensive” would be completely unsupportable – yet the prices would probably be the same.
Let this be an important lesson to me to remember that the rapid fluctuations of international currency markets can not be used to immediately label the regular prices of daily living “Expensive” and “Cheap”.
I wonder if the recent study which found Sydney to be the 6th most expensive city in the world made the same mistake I did?