Paying the price: Australia is ranked behind Switzerland, Norway and Bermuda in the 2011 study.

Paying the price: Australia is ranked behind Switzerland, Norway and Bermuda in the 2011 study. Photo: Virginia Star

Australia has been named the world's fourth most expensive country to live in by a study that also indicates China is poised to overtake the US as the world's biggest economy.

The International Comparison Program released data for its 2011 study in Washington overnight.

According to the study, China's economy was 87 per cent of the size of that of the US in 2011, assessed according to so-called purchasing power parity (PPP).

Economies with Highest and Lowest Price Level Indexes (PLIs)

Economies with highest price level indexes (PLIS) Source: ICP 2011

The program, which involves organisations including the World Bank and United Nations, had put the figure at 43 per cent in 2005.

Using market rates, US gross domestic product was $US16.2 trillion in 2012, compared with China's $US8.2 trillion.

The ICP also reported India has vaulted into third place using the PPP measure, ahead of Japan.

The PPP measure takes into account the exchange rates of different nations and seeks to compare how far money goes in each country.

"To calculate PPPs for its comparisons, the ICP holds worldwide surveys at regular intervals—currently, every six years—to collect comparable price and expenditure data for the whole range of final goods and services that make up the final expenditure on GDP: consumer goods and services, government services, and capital goods," the study's authors say.

They study includes data from 199 countries across eight regions.

Changes in methodology contributed to the speed of China's rise and India jumping to third-biggest in 2011 from 10th in 2005.

Australia was rated as the world's fourth most expensive economy to live in by the 2011 ICP, behind Switzerland, Norway and Bermuda.

All Scandinavian nations featured in the top 10, with Australia followed by Denmark in fifth place and Sweden in sixth, while Finland was rated as the eight most expensive.

Rounding out the top 10 were Japan in seventh, Luxembourg at ninth and Canada ranked tenth most expensive.

with Bloomberg