2009-06-13

Big Mac Index for non-economists

Big Mac? Not really, as Australian version of burger downsized (Daily Telegraph, 09-6-13)

at just 9.5cm in diameter, the Aussie Big Mac can't compete with the 12cm-wide beef behemoths of Central America and the Middle East. Not only is our burger 21 per cent shy side-to-side of those in Mexico and the UAE, it's also the lightest at just 201g. That's 18g, or 8 per cent less than the largest.

the Not So Big Mac has 22 per cent fewer kilojoules than its Canadian cousin and 31 per cent fewer carbohydrates than Malaysia's.

there had been an 8 per cent rise in the sodium content [of Aussie Big Mac], from 891mg to 960mg because of how the meat is seasoned. Still, it's the lowest-sodium Mac in our survey. Canada's is next (1020mg), then the US (1040). The UK's has twice as much as the US version at 2100mg. Malaysia's is a frightening 2700mg.

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The Big Mac Index, as compiled by The Economist, is "a light-hearted guide to exchange rates", and is "based on the idea of purchasing-power parity, which says currencies should trade at the rate that makes the price of goods the same in each country. So if the price of a Big Mac translated into dollars is above $3.54, its cost in America, the currency is dear; if it is below that benchmark, it is cheap."

According to the May 2009 compilation, the Aussie Big Mac cost only US$2.19 using current exchange rate, which means that the Aussie currency was 38% undervalued. But if you take into account that the Aussie Big Mac is smaller and lighter, then the Aussie currency is not so "cheap" after all.