The cost of living is a significant factor for individuals and families when deciding where to live, work, and budget their expenses. It is commonly used to compare how affordable life is in different places. For instance, the cost of living in cities like Port Moresby or Lae is typically much higher than in rural towns such as Goroka or Madang. This gap in costs can influence decisions on where people choose to live and work. 

In Port Moresby, living costs can range widely depending on lifestyle. Rent alone can vary between K400 for a room in a settlement dwelling or K4,950 per month for an apartment, while food costs might range from K800 to K1,980 monthly. Transportation costs also fluctuate based on whether individuals rely on public transport or private vehicles. This high cost of living, especially in urban areas, reflects the growing gap between urban and rural affordability in Papua New Guinea. In contrast, rural towns often see lower rent and food costs, making them more affordable for many families.

Consumer Price Index (CPI) is used to track the cost of living and economic trends. It measures the average change in the prices of common goods and services that households buy over time. CPI is a key indicator of inflation. If CPI increases, it means prices are rising, signalling inflation. According to the September to December quarter 2024 report from the PNG National Statistical Office, the headline CPI showed an increase of 2.7 percent. 

Employers and policymakers also use the cost of living to guide decisions on wages and benefits. For example, adjusting salaries to keep pace with rising expenses ensures employees can maintain their standard of living. In Papua New Guinea, this is increasingly critical as the cost of basic goods and services continues to rise.

Finally, lifestyle factors, such as whether families live in nuclear or extended households, can influence the cost of living. Extended families often share costs, such as rent and food, helping to reduce individual expenses, while nuclear families may bear more financial responsibility individually.