Brenton, it's also used to determine how much to pay the top execs you mentioned.
Melbourne is about the tenth most expensive city in the world, so execs can ask for more money to live and work there, because the cost of living is so high compared to places like the Midwest of America or central Europe... (or Castlemaine).
In contrast, the worst third world hellholes that are full of corruption and violence such as Damascus, Kabul, Port Moresby, Karachi and most of Africa are rated at the bottom of the liveability index, so any executive or DFAT bureaucrat who is unfortunate enough to be posted there can ask for extra money in the form of a "hardship allowance".