Money

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

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