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Economists and policy makers are increasingly interested in analysing living standards across countries and changes in their relative rankings over time. The different social and institutional arrangements that exist in countries around the world create difficulties for such international comparisons. Comparisons of economic data are further complicated because economic variables are expressed in different currencies. One method of comparing economic data from a national currency to a common currency such as the $US is to convert them using exchange rates. However, this simplistic approach is not appropriate for comparisons of standards of living and other similar comparisons and can lead to quite misleading conclusions. For comparisons of this nature a more robust and appropriate method is to use Purchasing Power Parities (PPPs), which directly reflect differences in the prices of goods and services in different countries.

The International Comparison Program (ICP), originally called the International Comparison Project, is a global effort to produce PPP estimates. The next round of the ICP is scheduled for 2003 and Australia is strongly committed to it. The Australian Bureau of Statistics has played an active role in the planning of the 2003 round, and expects to support the program through representation on key governing bodies and through the provision of technical assistance in the Asia-Pacific region.

This article explains why PPPs are preferred as the basis for making international comparisons of living standards and describes the ICP, including plans for the 2003 round.