Ask LH: Why Does Everything Still Cost More In Australia?

Hi Lifehacker, I am writing because I'm very curious, but have never understood, why prices (especially for technology, computers and the like) are so inflated here in Australia compared to other countries, such as the US. Obviously, I don't know much about economics and how the overall world economies work, but as a consumer, it's really frustrating to see products being released at the same time overseas as here, but with the Australian release having a much more bloated price tag. A good recent example is the ASUS Transformer which was released here last week at $599 while in the US it was released at around $US399 (which, according to the all-knowing Google, is something like $373 Australian).

Why is this? I'm all for buying within Australia and supporting our economy (and hopefully jobs), but with crazy price tags such as these, I tend to always import my things from China/ROC/Hong Kong or sometimes the US just so I can afford certain things, and so I don't feel like I'm being ripped off. I also remember the same issue with games (when I used to have time to play them). New games got released here from upwards of $100 while overseas prices were $60 (from memory).

Anyway, please enlighten me (and other confused Aussies) on why this is. Thanks, Disgruntled Poltak

Dear Disgruntled,

There are a bunch of factors at play here, but the dominant reason is this: companies can get away with it, and there's a long-established tradition of getting away with it. Australia's relative geographical isolation has always meant that goods of all kinds — computers, songs, TV shows — are often released months or years after their appearance elsewhere in the world. Distributors would tie up exclusive deals to release a particular item within a local market, and that became the only source for all practical purposes. As such, they could charge whatever they thought the market could bear. Even allowing for the physical costs of imports (and the local rights), that markup was often considerable. Customers had no choice but to suck it up.

This should have changed by now. It's much more feasible to import goods from overseas than it was even 20 years ago. Back in the day, international postage networks were slower; credit cards were less widely accepted (many Australians still relied on Bankcard, which only worked in Australia and New Zealand); and most important of all, there was no internet to make it possible to easily order goods from overseas. It wasn't impossible, but it was much less common, and it was rarely a route to saving money. More often, it was a route to getting stuff that simply wasn't going to appear here at all.

These days, that has all changed, at least from a consumer perspective. We know as soon as new gadgets appear, and we know what other countries will pay for them. Laws concerning parallel imports have been greatly relaxed in many categories, and in practice Australian Customs aren't going to hit you even with import duty for most goods unless they fall into an obviously prohibited category or cost a fortune.

While there can be some nuisance value associated with buying an item from overseas — extra postage charges, the necessity of perhaps changing the power plug — that isn't much of a disincentive. And that's talking about physical goods. Digital goods can arrive instantly, and the delivery cost is essentially the same for the seller no matter where the purchaser is located.

Yet despite that, as you point out, we still often see major price differences between goods for the Australian market. This is particularly annoying with digital goods, since we know there's no logical reason for the cost differential. And when the Australian dollar is strong — as it has been for all of this year — we feel particularly ripped off.

Will this change eventually? Probably, but arguably not in a hurry, and not completely. The main reason is this: enough people are still happy to pay the local price. That might be because they think they'll get better support, or because they want something right away.

In many cases, it's because they're ignorant of the alternative. Plenty of people think $1.69 is a good price for a single song from the iTunes store. They don't care that in the US, customers get it for 99 US cents. Very few people will decide not to buy a Mac because the price for an OS X Lion upgrade in Australia is a couple of bucks higher than in the US.

One nuisance with the shift to digital goods for people who do care about pricing is that it makes it easier to enforce those regional pricing strategies. Region-coding on DVDs and games and DRM on online music stores allow those artificial barriers to be maintained more easily. At the same time, however, digital technologies such as P2P also make it easier to trade those artefacts entirely freely.

Markets change when they have no choice because competition becomes overwhelming. Physical CD prices have stayed relatively low in absolute terms because the alternative digital-only option is too compelling for many customers. Phone prices have been dropping this year, as Android makes it possible to produce a bargain-priced smartphone that still has consumer-friendly features. (The Android Market itself adjusts pricing dynamically, so we don't get hit with an Australian currency penalty.) So while I think we'll eventually see more equitable pricing, it's not a change I expect in a massive hurry.

Cheers Lifehacker

Lifehacker's weekly Loaded column looks at better ways to manage (and stop worrying about) your money. Got your own question you want to put to Lifehacker? Send an email to [email protected], and include 'Ask Lifehacker' in the subject line.


Comments

    An even better example: ski gear. Burton gear routinely costs twice as much, or more, in Australia. And of course, Burton's US retailers are forbidden from shipping internationally. The solution? Middleman sites like priceusa.com.au that will receive your order in the US, then ship it internationally, for a small fee.

    I was berated by a local ski shop for admitting that I had bought some snowboard bindings that way for $240, rather than the $450 charged by the shop. I was accused of "not supporting the Australian ski industry". But it's not the local industry that is cleaning up there - it's Burton. That $200 saving is money I can be spending at the slopes, not making US shareholders richer.

    It's not just tech. There were news articles last week about why SYD-LAX-SYD costs $500 more than LAX-SYD-LAX on the same planes.

    It's everything - not just tech, not just flights - clothing, houses, petrol, the list goes on.
    This is because in places like the US, the cost of living is lower, and so are wages. The average wage in the US is something like $25 000 - $30 000 a year. This only just meets the requirements for minimum wage in Australia.
    Things cost more because we're paid more, and our economy is "good" (read: China is buying up our resources and putting up prices in a two-speed economy).

      @lauren

      What Rot

      A quick browse through the internet gives me old figures of

      The 2003 Median Income of US households was $45,018 per annum.

      and in 2007/8

      The Median Income of Australia households expressed in USD was $44,820

      granted there will be varying socio economic differences in both countries but on the whole, US has always been better off than Oz

        Spouting out figures like this are meaningless, as using market exchange rates to determine the equivalent 'mean' wage across countries is hugely inaccurate - for example, over the last 10 years the AUD has been between 0.5 and 1.1 USD, so depending on which day you compare cross country incomes one country will appear 'richer' than the other.
        Economically speaking, the PPP adjusted price should be used as this accurately describes relative purchasing power - read http://en.wikipedia.org/wiki/Balassa-Samuelson_effect.
        However, this only occurs over the long time - i.e. as income equalises across countries, which takes decades. Hence, for us to be able to buy goods at the same price as the US our wages would have to fall, theirs would have to rise, or the exchange rate would have to change. The last is most likely to occur, so expect the exchange rate to drop in the next year or two.
        My suggestion? Make the most of these specials over the net while you can

        The figures you're using are totally outdated - the numbers you're using refer to a time when the 1 AU dollar bought roughly 50-60 US cents.

        If AU salaries are shown in US dollars, you need to consider the exchange rate and compensate accordingly.

        When you condiser exchange, our salaries seemed similar in USD, but if you convert back to AUD, you get a lot more dollars, hence, higher salaries.

          Hi Lauren

          Yes outdated it may be - but at the time it does not matter what the exchange rate was - it was expressed as USD so you can compare apples with apples. yes your point is noted - converting back does give a higher salary but the "Bang for buck" is still missing. Actually I have just checked the US census figures (which I guess I should have done in the first place) and the Average salary for US last year was $USD45,000 and in OZ around $AU65,000 which is certainly buying a lot more against the USD these days, however go back a couple of years when the exchange rate was bad and and we were definately worse off. Trouble is, there is hardly any local manufacturing left - Most of the goods you buy originate in China and Prices are expressed in USD. Now Importers may have paid for some of their stock already and and larger companies may set their own exchange rate for the books for the financial year but the Au dollar has been strong for a while now and I guess the question is why aren't the supposedly lower prices being reflected in the market. My Guess. Everyone is making hay while the sun shines

      How dare you, the world would be a better place if we did not have people like you!

      The FACT is that a lot of goods are much cheaper in western Europe, a place with a high cost of living!

    Behind the News on the ABC offers some other explanations: http://www.abc.net.au/btn/story/s3236816.htm

    The wage thing's relatively important, too. We have very high wages here, therefore we have more disposable income for luxury items and can bear the cost of price hikes we think we have to pay.

    Also, let's not forget how rare it is for prices to come down and that it's only been a couple of years since our Aussie dollar was below 80c US which made those prices seem fairer.

    Capitalism which doesn't adjust quickly sucks and leads to things like the closure of Borders for their ineptitude in handling Online Book Sales and huge markups. I have seen books on Borders' shelves more than double what other AUSTRALIAN retailers sell the same book for, let alone Overseas.

      The prices at Borders were ridiculous. One book I have on my wishlist was $140 at Borders, $32 on Amazon. Why should I spend an extra $108 to by locally (plus it was a dogeared copy). No wonder the Borders stores are all closing.

    This is a difficult area to fully cover.

    While not mentioned in the article, local importers (or the local arm of an international company) has certain costs to cover that are specific to this region. For example, providing locally-held warranty spares, providing support phone lines and other customer-facing stuff. In addition, they have costs associated with the wholesale channel (account reps and other indirect costs).

    All of this contributes to the overall pricing.

    It's also overly simplistic to say that "people will pay the inflated price".

    Some people prefer to purchase locally (within Australia, or within their own town) in order to benefit from the support that can be had more conveniently. Purchase from O/S and, perhaps, you'll have to deal with the O/S retailer for any problems you encounter - at the very least adding inconvenience if not direct costs.

    ...and this is still just touching the surface of a large issue...

    Angus,
    As a small business owner I have to disagree. I want to charge comparative prices for my goods but it is not viable under the way I have to purchase my product. Currently I have to buy through a middleman in Australia. They own the rights to my product, they set their wholesale price (that is comparative to the US RRP) and then on top of that I have to put my retail price. Keeping in mind I am not allowed to by-pass the distributor or I will either get sued or blacklisted from them (and potentially other distributors in my industry).

    As an employer, wages are also significantly higher here, and that has to be taken into consideration as well as paying a lot more more rent for my physical location than in other countries.

    At the end of the day retailers get constantly vilified, but I can assure you that I am not out to gouge my customers, I want them to get the best price possible. I also don’t want to lose my business to the overseas market - but there is no way I can charge comparable prices.

      Well Stacey, as much as we sympathise with you, customers will always seek out the best deals even if that means retailers like Borders going bust. The solution for you is to find other ways of either bringing your prices down, adding extra value, adding extra service, changing your business model, or even changing your products.

      The internet is not going away, and even if we do have to pay GST on imported goods, it won't stop people looking for the best deal.

      This is something all Australian retailers will have to adapt to and accept.

        Stacey is correct, I used to work in retail and I'm well aware that it's the middle man 'suppliers' that are gouging the Australian market.

        Often the items we were selling were costing my STORE more than what they would online. That obviously flows on to the customer.

        The laws need to change to stop sole distributor 'rights' which only hurt retailers and consumers.

          These issues and more are being reviewed in the Productivity Commissions current research into the Australian Retailing Industry. Im interested to see what their recommendations are regarding online competition.

          Unfortunately submissions have just closed.

          http://www.pc.gov.au/projects/inquiry/retail-industry

          Be it the retailers or the distributors, we are still paying significantly higher prices than the US. The only way we can protest this massive disparity is with our wallets.

          I also think its a bit of a cop-out for retailers to blame the distributors. Retailers should understand the lessons learned from consumers, if you are getting a raw deal, shop elsewhere.

        Sure, the customer will go with the cheapest deal.

        Remember to compare apples with apples though.

        If something goes wrong with your O/S purchased widget will the local guy care? Depends. In the IT world, some products have warranty only in the country of purchase. Save $50 and cost yourself $150 in freight charges getting your warranty honoured.

        Then there's localisation issues - US financial software may not understand GST and how to process it. You'll be left with work-arounds to get the same result (and I'm not denying you could achieve the same result but it'll be at the cost of your time and effort working out how). Then if you need to send that information as a data file to your accountant you suddenly find they can't use it - increased fees from your accountant. Just one example of this class of issues.

        There's sometimes hidden costs associated with an overseas purchase - e.g. local taxes that might get applied, shipping charges, customs/import duties, etc.

        So, the local guy (or girl) has taken these worries out of your hands. While that may add costs, it's your decision based on your own risk assessement how much you care about those added costs.

          International Warranties are not worth the paper they're printed on. Two data points for me:

          I had an Acer laptop with an "International Travellers Warranty". When I had a problem in Finland I went to the local office to get a repair. They simply refused to acknowledge that the warranty existed and basically implied my laptop would be hostage until I paid. Since I was only in the country for a few days (heading to another country), I had no choice but to pay up. I complained back to Acer UK (where I'd bought it) and they simply didn't reply.

          I bought a Panasonic camera in Sydney last year. When it failed in France in the first six months, the European Panasonic folks simply ignored the international warranty because I didn't buy the camera in the EU. Panasonic's global support folks also ignored my requests.

          It took about six months of working through the NSW Office of Fair Trading for Panasonic Australia to take the camera in. Unfortunately it would take a court to say something about whether Panasonic can legitimately sell a device with an invalid warranty.

    This list could become huge....

    But vehicle prices (and accessories) also have a huge increase when they touch the australian market

    I agree with most of the comments on here - having recently moved from "Rip Off Britain" to Australia I'm shocked at how badly the Aussie consumer is treated, it makes the UK look like a perfect market in comparison. This is especially true when it comes to digital content, there's is no excuse for Aussies paying $90 for a game on Steam that retails for 30 quid or $60 USD.
    When it comes to physical goods I do feel for the retailer - but that's not my problem as I consumer I want to get maximum value for money and will import items from other countries whenever it's convenient to do so. I have bought big ticket items in Oz like an iMac - as the price was comparable to the UK prices.. so it wasn't worth the hassle of importing. I just wish internet shopping was bigger in Oz - the fact that there's not Amazon etc is a joke. Also, no real competition between supermarkets which have forced the prices of lots of goods down in the UK. Here you basically have a duopoly of Coles and Woolies.

      We definitely have Amazon. Go to www.amazon.com and select the Australian website region. :)

        Thanks Lauren - Amazon.com won't deliver most of the stuff on their website to Australia :-(

        I must be missing something... http://goo.gl/OXP9c

    I can't understand how a 2012 Nissan GTR is over ~$85,000 AUD in the US when here it would be in excess of $200,000!

    For the price of a crap HSV in aus, you could own a supercar which goes 0-100 in less than 3 seconds in the US. Outrageous.

    Touché on vehicles. Small swings in currency have huge impacts on margins. The prevailing FOB costs are usually set around long term or rolling averages, or agreed future estimates. Local car distributors are creaming it, protected by bullshit Australian Design Rules and the compliancing system.

    And this is why I wont support local outlets, until the distributes get there heads out of their backsides, I'll continue to save $100 by importing from HK, Europe and the US.

    I am looking to buy a new Alienware laptop soon. On the Australian Dell website it's at about AU$2,000 yet the American Dell website lists it at US$1,000. What is the difference? Will the American version function as well as the Australian one? I see no reason to fork out another $1000 for what seems to me like some Australian CEO getting richer.

      Check the terms of the warranty, and you will also need to purchase an Australian power pack, as the US ones are 110v

        Warranty yes. Power pack? Definitely not. Laptop power supplies have been multi-voltage for at least a decade. Even if it isn't, it's nothing that $50 can't fix so no big deal.

        That's incorrect.

        Modern switch-mode power-supplies are rated for worldwide use, and will function in both 110v and 220v outlets (and at 50Hz or 60Hz).
        Any laptop you buy will work just about anywhere in the world - and the same goes for almost all DC-powered items on the market today.

        Warranty? The thing's half price. If it dies, just buy a new one!

      Unfortunately, if u buy off the alienware site in the US, they only ship to US addresses. Had this problem when i was in Canada.

        And also not only are the prices different, some of the options are not available in Oz. (screen res, processor, ect

    three words: US Sales Tax.

    Do the currency conversion sure, then add 7-15% onto the prices you see for tax. There are also hidden taxes/fees on prices in the US.

    GST means the price we see is the price we pay.

    Doesn't explain it fully, but does account for a lot. (including the SYD>LAX>SYD vs. LAX>SYD>LAX flights)

      No US state that I'm aware of charges sales tax on international (out-of-state) purchases.

      Your quite right Ben, I purchased some shirts in JC Penny when I was last in the states. Advertised cost was about $20 for the shirt, but at check out it was well over $25 after state and federal taxes were added. Every state and even counties have different taxes to each other, so all prices are shown tax free, then you have to add on the taxes dependant on where you live at time of purchase. The only way to avoid the complex US taxes is to buy from overseas.

      A buyer in the US does not pay just $399 for that ASUS transformer. They still have to pay the additional taxes. A buyer in California can buy a computer online, but if he doesn't declare it at tax time there'll be hell to pay.

      In Australia we pay the tax inclusive price. No more to pay.

      But... having said that, we still do get ripped off depending on the retailer.

      Oh, some one earlier asked about the price difference of some expensive cars. That's the fault of our politicians. Check out the ridiculous LCT (luxury car tax) ... it's huge and does NOT protect our car industry as we don't make luxury cars.

        @Bernhard: "The only way to avoid the complex US taxes is to buy from overseas."

        No. You buy from another state where the company is not domiciled - that's why catalogs are so huge in the US. When I lived in the US I paid no sales tax for anything I bought online except ironically for Amazon which was based in WA state where I lived.

        5-15% tax added, does not equal 100% or more increases.

        I was in the USA a couple of months ago and bought up a lot of clothes for the wife and baby clothes for my brother.

        Osh-Kosh were selling baby tops for $2.95, the same were costing $29.95 in Australia.

        I bought a bunch of Abercrombie and Finch tops for her at an average price of $8

        No comparison we're being ripped off because everyone expects our prices to be higher.

        It's all mad in China anyway, the shipping is actualy cheaper to Australia.

        Yes your prices tags on your items do include taxes that is correct.. this really means you have no idea what you are paying in taxes. There is currently NO federal tax on purchases! You are dead wrong on that one. No hell to pay and no reporting to do if you buy an item interstate online or buy mail or catalog sales. In the USA we have a concept called interstate commerce. If an item is sold and bought within a jurisdiction say California you pay California taxes. Say that item is sold and bought within the same City, County and State you pay those taxes. This means the state of California cannot collect taxes for items sold in say Colorado or Nevada etc. This means if you buy online interstate it is tax free. Yes you are right each jurisdiction can and most often do have a sales tax. But currently there never has been a federal sales tax.
        Having your taxes added in ahead of time to the final price as done in Australia, only serves to cover up the tax rate your paying and is a crutch for not having to know and calculate the taxes prior to deciding to make the purchase.

    Some of this analysis may be misguided - first-year economics tells us that firms set the price for a particular good based on what consumers will pay for that good. Higher fixed and variable costs contribute to the higher equilibrium, as do higher real wages - that is, higher relative to the cost of living.

    Another soon to launch service which gets around the restrictions of
    the US retail sites and offers huge savings on normal Australian
    retail prices is www.storetoyourdoor.com.au. They guarantee the lowest
    shipping rates along with the lowest fees around. Might be one to
    bookmark?

    Why ? Because they can and because every single business on planet earth that would rather make one easy dollar than two hard ones. Welcome to capitalism.

    More 2cs.

    Plane tickets. It cheaper for me to fly and holiday in Bali than the majority, if not all, Australian capitol cities.

    What to know which one gets my holiday cash?

    The problem is that I am highly aware that the economic on-flow of my job is leaving the country, increasing the problem that is highlighted here. If I did choose an Australian holiday it would either have to be shorter or with poorer accommodation. I am not a 5 star man either. All I need is a clean bed and shower. Even just that is expensive here.

    I would love to see Lake Argyle but I am not paying $900 return just to get there. $1800 would get my and my wife to bali for a week with accommodation and spending money with better service to boot.

    I am in support of good prices for Australia, however it is obvious that the manufacturers and middlemen are the problem here. Retailers and consumers are getting a raw deal.
    It's convenient for us consumers to justify our internet purchases by believing that retailers are ripping us off.
    We are paying too much, however many retailers are struggling.
    Who is really making all the money? Shop leases are crazy. Probably red tape is a factor too.
    If this continues, retailers will go out of business, people will lose jobs, leading to a recession, and then prices of discretionary items will be a moot point, because few of us will be buying them.

    An interesting thing to consider is Steam.

    Not the stuff that comes off hot water, I mean the Games store operated online by Valve.

    Most games, you get for the same prices as the US - I just pre-ordered Deus Ex: Human Revolution for about $44 bucks - and I only say about because I'm too lazy to do the currency conversion, it's actually slightly less.

    However, there are the odd outliers - For example, brink, at 60 bucks in the US, will run you 90 bucks on steam, for a literally identical product as you'd be getting if you bought it in the US.

    Admittedly, you can get around it - simply get your US friends to buy the game and gift it to you, and then pay them the money - but why should we have to, for a literally identical product, where you're the one paying the analog to shipping costs, if you're a person who has a download cap.

    Also, Let's not forget - These games, if I buy them from a brick and mortar store instead of steam, it's going to run me 90 bucks minimum for a PC game, and $110, $120 for a console version.

    I mean, I know WHY that's the case - greed, and because they can get away with it - but Why should it be the case?

    If you're a video gamer that buys from Australian retailers still. Stop it because your supporting the standardized overcharge applied to gaming (& all electronics). If you really want to buy games, use

    www.ozgameshop.com

    Not only are the prices much, MUCH lower & fairer than any retailer here your voting to change the prices of all games in Australia so be uniform with the rest of the world.

    Please help us with this cause!

    (P.S. If you think your helping jobs in Australia such as EBGames *cough* gamestop *cough*, think again...)

    Government-mandated compliance and taxes add a lot to local prices.

    Electronics imported here all need C-Tick and many need also A-Tick certification as well - these require expensive tests that are not done on goods made for the US market.

    Take network cables, for example. They are A-Tick regulated by ACMA in Australia, like mobile phones and modems. The A-Tick tests cost around $7000 - how many $2 network cables would one importer have to sell to recoup that?

    GST and import duty levied on importers, at a national level, can't be avoided, unlike the various US state taxes.

    The ACCC has strong customer protection rules in place, that require retailers to offer significantly better warranty service that you would get from a US vendor.

    Salaries here are higher, and super here is a mandatory 10% cost to the employer on top of an employee's salary - in the US, it's up to the employee to sacrifice some of their salary to super.

      Super has nothing to do with the employer - it is taken out of our salaries "for" us and put away.

      If I earn $50K a year, then $5K of that is put toward super "for" me, and I see $45K before tax.

      It's NOT that I see $50K a year before tax, and my employer has to foot another $5K on top to cover my super.

      So please explain a 50% markup on a USD 2500 Lenovo laptop, particularly when it is a) made in the same factory as the US version,witht heonly difference being the power cord that plugs into the power brick, b) takes longer to get to us (6 weeks instead of 7 days), and c) has a worldwide warranty? Just one example of many - I say stuff em - we have been ripped off for far to long

    Digital Distro is the worst for this kind of thing, our internet is already more expensive anyway so we get double slugged even though i do love it when a game is the same US price as it is AU

    Some say its cause of minimum wage/ average us wage and what not, i just think its cause our economy is plain screwed.

    We've got a high dollar and what does that really do for us, petrol doesnt shift, prices arent as competitive and tourism takes a hit.

    Maybe one day it will balance out

    Thanks a lot for the reply, Angus.
    I can see after reading the article and comments that it's a very complicated issue, with lots of factors impacting all the price outcomes here.
    Really appreciated learning the actual reasons why this is.
    But all-in-all, it's extremely frustrating trying to multi-task keeping up with the latest and greatest in tech, "supporting" the Australian economy, and being a poor, whiny Uni student spending most of his income on rent and food... but as some other posters have said here, maybe the best way to help is to boycott the huge inflated prices with our own wallets.

    Thanks again,
    a bit less disgruntled poltak

    screw the local retailers buy online.

    And this is why we're one of the worst countries in the world for copyright infringement.

    Yaaarrrrrrrrrr.

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