The price of groceries, electricity and housing are soaring, but there are some cities in Australia where your dollar can stretch a bit further than others.

New research by Compare the Market has named the most cost-effective cities to live in based on factors such as the average income, utility costs, grocery costs and apartment costs.

Melbourne was crowned the most cost-effective city in Australia, scoring 3.36 out of 5 stars. According to the research, Melburnians have an average income of $3,478 per month after tax and spend about $169 on monthly utilities, $40 on a bag of grocery staples and $619 per square foot of property.

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Next on the list was Perth scoring 3.33 out of 5 stars, followed by Sydney (3.25 stars), Adelaide (2.87 stars) and Brisbane (2.57).

Aussies living in Adelaide can expect to pay the most for their grocery shops, spending about $43.50 for a shopping basket containing a loaf of bread, milk, eggs, cheese, chicken, beef, apples, bananas, oranges, tomatoes, onions, potatoes and lettuce.

Compare the Market general manager of money Stepher Zeller said the rising cost of living was motivating many people to relocate around the world.

“Over the past few years following the pandemic as inflation rates and income tax in many countries have risen, many people have felt the financial effects. On the back of this, many are looking to relocate to cities which are more cost-effective for a better quality of life,” Zeller said.

Houston, Texas was named the most cost-effective city in the world, followed by Bucharest, Romania and Chicago, Illinois.

Cheapest Aussie cities to rent

The research looked at the cost of an average apartment in the city centre per square metre. So what about renters?

Well, Adelaide is actually Australia's most affordable capital city for renters ($534), while Sydney is the most expensive ($711), according to the latest CoreLogic rental data.

Melbourne is the second cheapest city based on median rents ($535), followed by Hobart ($567), Perth ($583), Darwin ($587), Brisbane ($604) and then Canberra ($677).

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