Many economic statistics seem conceptually simple, but are rather intricate and technical as actually measured (or more accurately, constructed). You can’t just line up dollars of GDP and count them. Price indices are similarly fiendish.
Conceptually, the purchasing power parity exchange rate between two countries is simply the relative cost, in local currency units, of buying the same basket of goods in each country. This can be very different from the market exchange rate, but is generally a better way to convert, say, GDP per capita, if you’re interested in cross-country comparisons of welfare (GDP? welfare? we’re already on shaky ground…)
Last week another Australian I know in DC was surprised to see that the International Comparison Program’s (ICP) 2015 PPP exchange rate for Australia is 1.487. Are things really 50% more “expensive” (dollar for dollar) in Australia, he wondered?