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Cost of living in the Philippines vs Australia

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By Derek Stewart

PhilAn important decision whenever you relocate temporarily or permanently is the cost of living in your new country versus your home country. When expatriating or living a location independent lifestyle, you also need to factor in how your income will change. If you salary doubles in a new location, but you cost of living triples, your purchasing power has actually decreased. Comparing purchasing power is the crucial thing that people forget when comparing costs across countries.

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 wages. 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 may earn a month’s full time wage in the Philippines from a single 8 hour shift in Australia.

This labour arbitrage is what makes roles that virtually don’t exist in Australia: personal driver, live-in nanny and live-in maid a common occurrence in the Philippines. These roles that may cost $30,000-$40,000 (Php1.2-1.6m) annually in Australia, instead cost just $25-$100/week in the Philippines. This labour arbitrage is also what has created a 1,000,000 person strong and thriving BPO/Offshoring industry in the Philippines pop up from nothing over the last 10-15 years.

This knowledge gives you a good idea of where costs of living will differ, and that is labour intensive areas. Massages, restaurant service, McDonalds delivery and haircuts are all significantly cheaper and to a higher standard in the Philippines, whereas in Australia the wages drive up costs and drive down service possibilities. Good luck getting McDonalds delivered 24/7 to your front door in Australia, or having a masseuse do a house visit and 1 hour massage for $5. Lower wages is what makes restaurant meals cheap, but not groceries. It’s what makes taxis cheap, but not petrol. And cinemas cheap but not electricity.

Tax is another difference, low taxes on cigarettes and alcohol in the Philippines means that you can get 20 packets of cigarettes for the cost of one packet in Australia, or a bucket (6) of beer at a pub, for half the cost of a single beer in Australia.

Rent follows supply and demand, and the three rules of real estate: location, location, location. Premium inner-city areas in key CBDs are more expensive than places in 2nd tier cities or in the provinces. Overall though residential rent in Makati (main business district of the Philippines) is a quarter to a third of what it would be in Melbourne or Sydney CBD.

This new perspective on costs and why they differ will help you make informed decisions when considering re-locating, or when negotiating salaries for an overseas job. Factoring in the amount of labour involved will normally give you a good idea of the cost difference. Something like an imported Western grocery item can actually cost more than it would in Australia, but anything with a lot of human involvement will be much cheaper.

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 also a handy rule of thumb as salaries are quoted per month (Php) in the Philippines, and per year ($) in Australia.

So a Php30,000($750)/month salary in Makati would give you a similar quality of life as $30,000/year in a large Australian city. Likewise a Php200,000($5000)/month salary in Makati would allow you to live like someone earning $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.

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.

derekDerek Stewart – Executive for MultiRational Corporation

Aussie expat helping Australian and New Zealand SMEs set up their back offices in Philippines + expat visa processing.
September 1, 2014
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