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Expats working in a foreign country typically experience one of two remuneration packages; either they’re paid in their home currency, or in the local currency.
In these days of global trade and lucrative foreign exchange markets currency fluctuations are experienced by more of us every day.
And while those on the “right” side of the equation can often benefit handsomely from the currency differentials it can be an altogether different experience for those on the other side.
Just such a situation is arising at present with many workers in Australia, who are finding themselves being penalized by the ever-falling value of the Australian Dollar against major global currencies like the US Dollar and the Pound Sterling.
Expats currently working in Australia and being paid in the local currency have seen a considerable drop in the international value of their salaries.
According to a review by the Australian Financial Review (AFR) the Australian Dollar is currency worth 70 US cents and this is expected to continue falling for the foreseeable future. Experts expect this rate to reach 60c or even lower by the end of next year.
This means that when currency conversion is taken into account some long-term expats living and working in Australia could find their salary almost halved in real-terms.
While this is unlikely to represent a major issue who have relocated hook, line and sinker to Australia, for those still living an international lifestyle things could be rather different.
Imagine, for example, the expat that has retained a property in their home country, ensuring they have a toehold in their home country’s property market.
They have budgeted carefully and surmised that they can indeed afford to keep up with their mortgage while living and working abroad.
A drop in their relative income of some 30-50% could lead to some serious financial decisions. After all, this may severely limit the sums available to spend “overseas” – even if that area is their home country.
Whether it’s an overseas mortgage or paying for school fees in their home country these expats are likely to start feeling the squeeze very soon indeed.
Of course in terms of currency fluctuations, as in the stock market, for every loser there will also be a winner. Those expats who opted (given the choice) to get paid in their home currency (such as the US Dollar) will find that their money is going ever further in Australia. It’s the equivalent of a healthy pay raise without having to do any more work or take on any additional responsibility.
Expats in Australia, or planning to head in that direction shortly, are therefore advised to consider the options available to them in order to maintain the strongest financial situation possible.
Expats are advised to carefully consult current exchange rates, and to consult their financial advisors for educated opinions on the future of their adopted country’s currency. In doing so one will be able to make an informed decision about which currency is likely to be most beneficial for their salary – if the option to choose exists.
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Expatriate Group & Expatriate Healthcare are trading styles of Strategic Insurance Services Limited who is authorised and regulated by the Financial Conduct Authority (FCA). FCA Firm reference Number is 307133. Strategic Insurance Services Limited is authorised to carry on Regulated Activities in accordance with the permissions granted by the FCA under PART IV of the Financial Services and Markets ACT 2000.