Cost Of Living In NZ…?

March 5, 2014
Iain MacLeod

Now I am not sure if being named the world’s most expensive city to live in is any reason for Singaporeans to celebrate, but it may be a mantle they’d prefer not to have.

The announcement this week from the Economist Intelligence Unit that Singapore has now leap frogged Osaka, Tokyo, Moscow, New York, London and Sydney as the world’s (alleged) most expensive place to live in is, I suspect, not a whole lot to be proud of and perhaps explains in part the continued popularity of our seminars here in the city state.

Of course it might also be quite misleading.

I certainly don’t find it excessively expensive as a place to visit but then I guess I am not trying to buy a shoebox apartment in the sky, educate my children or get sick and need hospitalisation either……and this information is designed specifically to give companies an idea of what it will cost their Executives and other ex-pats to live in the 140 odd cities surveyed.

The survey doesn’t reflect what it costs the average person to live in Singapore, New York, Sydney or Auckland for that matter. Locals I imagine have a different spending profile to ex-pats and Executives and don’t usually shop in luxury stores, send their kids to international schools and often they live in cheap(ish) public housing, buy their clothes at H & M or Takashimaya, educate the majority of their children at local schools and they use public transport to boot. The ex-pats tend to have cars. Cars in Singapore are the most expensive in the world and international schools don’t come cheap.

It is possible then, as with all these sorts of surveys, a case of lies, damned lies and statistics. Or be very clear who the target audience is. Given you can still eat well for $10 at a local hawker centre on the one hand yet pay a small fortune for a meal at a five star restaurant, where a (modest) beer along Orchard Road can set you back $18 yet you can buy the same one for $4.50 if you head off the main tourist routes, where high end clothes are eye popping in price yet you can get reasonable kit at many local stores, I suspect many Singaporeans would rightly conclude it might be really expensive for ex-pats and high flying execs but for them it isn’t.

Which segways nicely into this week’s planned ‘Letters from New Zealand’ topic. I was stunned to read a report in the New Zealand Herald last week that suggested a family of four only needs to earn a little over $18 an hour or roughly NZ$38,000 a year in order to live. The article did not make clear whether it was before or after tax. I got the feeling it was before tax. That translates into roughly $600 a week to provide shelter, food, transport, clothes and so on for four people. It is a little over $700 a week if it did not include tax.

When we are asked by potential clients what a family of four needs to live a dignified life in Auckland out in the suburbs in a three bedroom house we tell them in our opinion the true figure lies between $4000 and $5000 a month or roughly $60,000 a year. That’s almost double what this survey suggests.

So which is right?

I have over the past week been researching as many different statistical sources as I can and my conclusion is that a family of four may be able to live in small town New Zealand for $600 a week principally because the cost of housing (mortgages or rent) is significantly lower than in the major cities like Auckland, Wellington and Christchurch. Anywhere else I simply don’t believe a family of four could do much more than survive on such a meagre amount without state support and supplements (which are freely tossed about).

People who rent property in New Zealand tend to spend about 20% of their income on shelter, around 25% on food, around 11% on transport, 12% on restaurants and eating out(!), utilities 10% and roughly 25% on everything else.

Of course one factor that does push down the cost of living in New Zealand is the fact that my forebears (wisely in my view) decided to socialise risk – education in order to provide an equal opportunity for all, health through massive economies of scale and of course social security/pensions and the like. So whereas in countries like Singapore taxes are lower than New Zealand the cost of living ends up at least as high if not higher for most families as they are largely on their own in terms of the things New Zealand tax payers take for granted – education, health and social security.

If you consider then that most people have those costs largely covered by their taxes perhaps $38,000 a year does cover everything else.

But I still doubt it.

I should also add that our clients tend not to be average – they tend to be more educated, more skilled and have greater savings than many New Zealanders so perhaps our estimate of what they need to continue enjoying that upper middle socio-economic existence is accurate for them and simply reflects the fact they live in more expensive areas, eat at more expensive restaurants, prefer iPhone 5S to the cheaper Nokia and they make sure their kids all have the latest gadgets. That certainly applies to some but not all.

I have analysed what it might cost a single person who arrives in Auckland, say, to find employment in order to progress their skilled migrant aspirations. The number I came up with? Around $2000 a month being $1000 a month for shorter term and modest accommodation, around $500 a month on food (if they cook) and around $500 on cellphone, transport (public) and other expenses. Add a partner and you probably add about $500 a month. Add two children and you’d add a further $1000.

So once these people have secured employment if they were to rent a two bedroom apartment in downtown Auckland or on the city fringe they possible can live on that $600-$700 a week but there won’t be a lot of luxuries.

My experience tells me that once people are in well paying jobs they start to add those luxuries and pushing up those expenses to the $4000-$5000 a month.

So while I would not dismiss the report in last week’s newspaper I’d hope that people appreciate that in New Zealand, just as in most countries, there are wide disparities in the incomes people need to live, what they would describe as a ‘comfortable’ and dignified existence. There is a big difference in how we choose to spend our income, where we want to live, whether we use public or private transport, public or private schools, public or private health providers, wear LV jandals or Haviannas and so on. Generalisations can be difficult.

My advice is to base your planning on the $4000 – $5000 a month for a family of four for migrants especially given most of you will end up (or have ended up) in Auckland where property values are somewhat over the top and therefore cost of living is higher. While you will earn more in Auckland (the average salary is $75,000 a year against $53,000 across the whole country) you will also spend more.

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