The World Bank has declared Australia one of the most expensive countries in the G20 economy. Australia's cost of goods and services makes it at par with other expensive European countries like Denmark, Norway, Sweden and Switzerland.
According to the World Bank, Australia ranks fourth out of 177 countries around the world based on price level index (PLI) which includes exchange rates and purchasing power in 2011. Economists believe Australia's cost of goods and services have increased due to the mining boom, high exchange rate and "unbroken" economic growth for 22 years. They also cited low unemployment rate, high labour costs and oligopolistic major industries as the main drivers of high local prices.
Harvard University Economics Professor Kenneth Rogoff said rich nations are usually at the high end of the list while the poorer countries make up the lower end. Professor Rogoff explained that Australia's high purchasing power parities (PPP) price level reflects the way high commodity prices drive wages which affect the price of goods in the service sector.
The World Bank report only reaffirms Australia as expensive based on international standards. In January, the Economist Intelligence Unit named Sydney and Melbourne among the top 10 most expensive cities in the world based on a cost-of-living survey. Sydney and Melbourne had ranked fifth and sixth, respectively, behind Singapore, Paris, Oslo and Zurich.
The World Bank study revealed that the most expensive economies are part of the Eurostat-OECD region, with the exception of Bermuda.
Switzerland was declared the most expensive economy, followed by Norway and Bermuda in second and third places, respectively. Denmark followed Australia in fifth place. Sweden, Japan, Finland, Luxembourg and Canada were included in the Top 10 most expensive countries.
Australian economy slowing down
The Australian economy will continue to struggle at a slow growth pace to remove pressure from the rising unemployment rate which is currently on its ten-year high. In the latest regional report, the International Monetary Fund (IMF) expects the country's economy to grow below the trend.
In its latest regional report released in April, the IMF has downgraded its growth forecast for Australia since October 2013 from 2.6 per cent to in 2014 to 2.7 per cent in 2015. The Washington-based institution has previously expected Australia's economy to grow between 2.8 and 2.9 per cent. The IMF said Australia's economy is expected to grow below the trend since investments in the mining boom have reached its peak and is now on a declining phase.