Although little has changed for anyone who has already moved their funds to New Zealand, a weakened NZ dollar means the country now offers newcomers better value than it did just a few months ago, relative to other countries.

The Economist Intelligence Unit says the relative cost of living depends on two factors – local prices and exchange rates. The global economic crisis has seen some currencies, such as the US dollar and the Japanese yen strengthen, while others such as the pound sterling and the NZ dollar have weakened.

The most dramatic example of a weakening currency has been observed in Iceland, whose overextended banks have virtually bankrupted the country. Iceland’s capital, Reykjavik, was the fifth most expensive city last year. Now, using February exchange rates, it has fallen to 67th place.

Auckland, which was the 49th most expensive most city in the list last year has moved to 78th place and Wellington has dropped from 55th to 80th place.

The plummeting pound has pushed down the relative cost of living in the UK with the result that London has dropped from eighth most expensive to 27th.

Jon Copestake, editor of the report, comments: “Two factors drive the relative cost of living: local prices and exchange rates. Normally our ranking of cities by cost of living is relatively stable, but in the current global climate changes in exchange rates have significantly altered our assessment of the most and least expensive cities.”

Note: The Worldwide Cost of Living survey compares the cost of living in 140 cities worldwide. In each city field researchers gather and return a range of prices for over 160 items, from a loaf of bread to a luxury car.

Comparative Cost of Living In Selected Cities: