Rip off Australia?

One of the unfortunate consequences of living in a country which extends its recession-free run to 22 years and beyond with low unemployment rates is that things can become expensive. As someone pointed out last week, why should Australian replica rugby jerseys cost $150 when Brits could buy their Lions jerseys for £50? 

Any Aussie who has gone to live in London will be familiar with what Aussie guests do when they first come to visit you, which is exactly the same as what Poms do when they come Down Under: start comparing the prices of stuff.

Australia is an expensive country these days. That's partly a function of the exchange rate - gone are the days when the proud Pommie pound bought 3 dollars and you could eat out like a king in Sydney for a tenner in British money.

But it's more than that, The cost of living in Australia has surged upwards in recent times, perhaps in many cases more than the consumer price index (CPI) implies. As an Anglo-Aussie who spends a lot of time in both countries, I'm reasonably well-versed in the nuances of this subject, so a few observations from yesterday...

A day trip to London

Aussies are most upset about the price of fuel being set to "soar to $1.70", but spare a thought for the Brits on this one - for the UK government has been taxing the living daylights out of fuel for decades. It cost me more than £100 to fill up yesterday. A hundred quid for a tank of fuel! Outrageous. Lord knows how truckies make a living these days.

What else is better in Australia? Traffic. The 150-mile journey to Hampton Court yesterday took me a preposterous 7 hours, including a short stop for much-needed caffeine at Peterborough services. I didn't dare drive all the way back last night, but even the 50 miles or so back to near Aylesbury for a bed took another 3.5 hours. That's nearly half a day of driving, and a few hours more today in order to get back 'home'.

There are now around 40 million cars in Britain and the population has continued to rise to 62.75 million. As far as I could tell, at least 61 million of those people were at Hampton Court yesterday. Every single available square metre of the grounds was populated with a person, making enjoyment thereof close to impossible.

Accommodating needs

Although Britain's population is not rising at the same pace as that of Australia, a major challenge facing the Brits is the population migration to London and the south-east, and the housing shortage crisis that this is causing.

There's plenty of talk of a "UK housing bust", but it's much rather a two-speed story. London prices and other cities in the south-east such as quality suburbs in Cambridge have barely seen prices skip a beat with strong price gains recorded throughout the financial crisis. Other parts of the country such as the north-east have performed dismally for half a decade.

Other things that aren't cheap in Britain? Hotels - at least £100 in the south-east for a soulless chain hotel not deserving of even 1 star on the RAC ratings. Much better to get a Bed and Breakfast for around half that price so you at least get a hearty meal to start the day.

Entry tickets for Hampton Court? £30 X 4 = £120. Not exactly a cheap family day out. As for booze - as a designated driver I didn't partake, but if the price of the comically small bottles of water on sale were anything to go by, there would have been no change out of twenty notes for the hordes guzzling jugs of Pimms and lemonade (it was hot yesterday, so it was selling fast).

It's definitely the case that Australia has become a high-cost country in which to live, but the Poms don't have it too easy either.

From what I have been witnessing there is definitely no recession in the south-east (restaurants and pubs seem to be packed out 7 days and nights a week), but then, things tend to cost a lot, so there is a trade-off. Elsewhere in the country, life is significantly cheaper comparatively, but then a disproportionate amount of the 7.7% unemployment rate relates to areas away from London.

The good life comes at a cost.

It's common to speak of "Generation Rent" in Britain. But although few like to hear it, housing in most parts of Britain is very affordable, with prices having retraced over half a decade and interest rates on hold for years just 0.5%. Mortgage rates can be fixed for 5 years at a percentage beginning with a '3 handle', so how can housing be unaffordable? The truth is that it's not the mortgages that are unaffordable; for most it's saving the required deposit.

Of course, housing in London is expensive. But I note that in the area where I sued to commute in from in Essex as a 21 year old, it's perfectly possible to acquire a quality dwelling for around £80,000, which means that mortgage repayments can be incredibly cheap at present - the interest component of a mortgage need only be a couple of grand. It may not be fashionable, but it should be reality for first homebuyers to start on a sensible rung of the housing ladder.

This, of course, is a familiar problem in Australia. Story after news story focusses on young couples being unable to afford to live within walking distance of Sydney Harbour or in the inner-city near Melbourne CBD - but if that is our real goal in a country with a booming population we are surely destined to fail. Instead, we should be looking at improving transport, housing supply and infrastructure away from the few capital city hubs.

The brutal truth is that young people in Britain are renting because they often don't have the discipline to save a deposit, instead inventing new 'essential' costs that were not considered so a couple of decades ago - mobile phones, overseas travel (often more than once per year), plasma screen TVs, new cars and all the rest. The UK Government's Help-to Buy scheme may fix this in the short-term, but this ultimately means dishing out more mortgages to people who have no reasonable proven track record of saving, which may not be a good thing.

History

Britain suffers from ridiculous overcrowding at such events as I attended yesterday, but the history is worth it. Hampton Court Palace and its grounds are spectacular, originally having been built for Cardinal Wolsey Henry VIII in 1514, before King Henry got bored of Wolsey and enlarged it for himself  in 1529 (he must've had a spare moment from beheading people).

I also took the chance to visit Waddesdon Manor, priceless stuff for an economic history buff (i.e. nerd) like me. One of the 40 major Rothschild residences dotted around Europe, it represents a staggering show of wealth.

A fascinating story is that of the Rothschild family: as bankers they were the wealthiest family in the world, profiting massively as financiers of the Napoleonic Wars and generating wealth from almost every venture they partook in.

Sounds like a great life, but on the flip side, in order to keep the wealth 'in the family', so to speak, they often married their first cousins via arranged marriages. Can't have everything, I guess.

With the family wealth being split across many descendants, the Rothschild's wealth was gradually dispersed, and Britain's inheritance tax rules put paid to the rest - the family was forced to 'donate' such properties to charity.

{Hampton Court yesterday}