Academic journal article Australian Journal of Social Issues

Equivalent Salaries in Five Australian Capital Cities

Academic journal article Australian Journal of Social Issues

Equivalent Salaries in Five Australian Capital Cities

Article excerpt

Introduction

Over the last decade, the spatial or geographical nature of social and economic indices has proliferated. More than ever, we are now armed with knowledge about the areas of socio-economic advantage and disadvantage. Indeed, research suggests that the fissures of socio-economic outcomes have become more pronounced. Moreover, overlaying geographical statistics helps to develop an understanding of the dynamics reinforcing one's socio-economic position. (1)

While these statistical developments are of considerable academic interest, the geographical nature of disadvantage has important public policy implications. For example, the appreciation of the geographical concentration of poverty has led to a whole gamete of programs focused on individual communities. This is perhaps most clearly expressed in the UK's New Deal for Communities (Lawless 2006), but similar Australian examples exist. Such programs focus on disadvantaged communities as a way in which to build local human and social capital in an effort to enhance the prospects of individuals living in those communities. Another policy response to geographical disadvantage has been to reform housing support programs to enable disadvantaged families to re-locate in areas with higher levels of employment. Geographical disadvantage results from a range of factors, with the geographical distribution of living costs one such factor that raises a range of related, but separate policy issues.

Governments have responded to the geographical distribution of living costs by offering tax deductions for residents in high-cost areas. In Australia, the Zone Tax Offset provides tax concessions for people living in remote areas and Remote Area Allowance (Centrelink 2007) is a benefit for income support recipients living in a remote area. In the UK it is the major metropolitan area that accompanies such support in the form of a London Allowance paid by employers.

While constant media coverage ensures that we are well versed in the cities with the highest costs of housing, there is remarkably little research on the differential living costs in Australian capital cities. The Australian Bureau of Statistics (ABS) does publish a short list of the differential costs of major grocery items as part of its Consumer Price Index (CPI) research (ABS Cat. No. 6403.0), but not much else exists. Internationally, the OECD's Purchasing Power Parity indices provide a means to make financial comparisons between countries (OECD 2002).

This paper examines the effects of differential costs in five Australian capital cities to determine the various salaries required in each city to obtain an equivalent standard of living. It answers the question, if a household earns $X in Brisbane, what salary is required to achieve the same standard of living in a different capital city? In answering this question, this paper considers a range of household types; from low to high income, and single and couple headed households. While any city could have been used as the comparator, Brisbane was chosen as it sits in the middle of the spectrum from most expensive to cheapest capital city in terms of housing costs.

The paper begins by explaining the method used to answer the above question. It summarises prior research which has been extended for the purposes of this study. The next section discusses the results, and is followed by a brief conclusion which considers the policy implications of the research.

Method

There has been very little research that calculates equivalent living standards in Australian capital cities, and none that calculates equivalent salaries. However, the issues of regional comparisons have been well discussed in relation to the treatment of housing costs. Siminski and Saunders (2004) have given extended consideration to these and other issues relating to regional comparisons, as discussed below.

A central concern for regional comparisons is identifying a way in which comparisons can be adjusted to account for regional differences that impact on living standards. …

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