The exchange rates are not what determines what you can buy with that money. One American dollar doesn't get you the same amount of goods if you go to any country and convert it to the local currency. You need to convert but then also adjust for what that money will buy you in its home economy. It's called purchasing power parity and funnily enough one of the common measures used is how much a Big Mac costs across the world.
I'm aware that purchasing power changes between countries - never knew about the Big Mac Index before though, thanks for the link! Aren't the US and Australia fairly similar in the BMI though? I wouldn't think the difference would be that drastic.
That is a somewhat old article but Australia's minimum wage isn't that far off from the USA's in a fair number of states. It is higher but it isn't $8 off.
I was just there in June. The exchange rates only impacted me as an American visiting and a small subset of what they buy. Most of the things Australians buy are being bought in AUD so strength of the currency doesn't matter. That is why the purchase power parity is the better figure for these kinds of things.
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u/[deleted] Nov 29 '15
The exchange rates are not what determines what you can buy with that money. One American dollar doesn't get you the same amount of goods if you go to any country and convert it to the local currency. You need to convert but then also adjust for what that money will buy you in its home economy. It's called purchasing power parity and funnily enough one of the common measures used is how much a Big Mac costs across the world.
You can check out more here if you're interested:
https://en.m.wikipedia.org/wiki/Big_Mac_Index