Sydney is the 10th most expensive city in the world

Global wealth consultant Mercer has released its annual 2013 Cost of Living City Rankings. The study ranks 214 cities based on the cost of living for an expatriate employee in each city. The aim of the Mercer study is to provide insights for multinational companies and governments to help them set compensation rates for their expatriate employees.

It is certainly an interesting Top 10. Three of the top four spots will no doubt surprise many; however issues around remoteness, security and short-term rental rates play a major part when considering cost of living for an expat. Consider for example that a cup of coffee in Moscow costs US$8.29! Coming in at number 1 is Luanda, Angola, followed by Moscow and N’Djamena, Chad in.

After accounting for the ‘more remote’ members, the list then contains many of the usual contenders. Fourth place went to Tokyo, fifth place to Singapore, sixth to Hong Kong, with seventh, eighth and ninth all taken by cities in Switzerland.

Perhaps the most surprising entry on the list (although not to many locals!) is that Sydney was rated the tenth most expensive city, coming in ahead of other global cities such as New York and London. While there are certain caveats to Mercer’s survey including that the base currency is US dollars which means that the cost of living is affected by movements in currency it does reinforce the commentary from many CEOs about how expensive Australia is to do business in.

With the cost of living being a major factor in the cost of doing business, it really is little wonder that Australian-based global businesses such as QBE Insurance (ASX: QBE), Incitec Pivot (ASX: IPL) and Transfield Services (ASX: TSE) have chosen to invest in expanding their businesses in lower cost overseas locations.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.

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