Ask LH: Why Are Australians Being Ripped Off For Next-Gen Consoles?

Dear Lifehacker, I was so excited about the announcement of the new Xbox One and PS4 at E3 on Tuesday and even happier when they mentioned the price. This excitement soon died when I released EB Games had priced the Xbox One for $100 more and the PS4 for $150 more than the announced price at E3. Why do us poor Australians pay such a large markup ? Are they overcharging? Thanks, Console Me

Dear Console Me,

The so-called 'Australia tax' — Australians paying more for equivalent goods than overseas — is always an emotive topic, and in consequence people don't always think about it sensibly. Let's look at the specifics in this instance.

The prices EB Games is quoting are the recommended retail price set by the manufacturer for Australia, which is distinct from the US dollar pricing quoted at E3. There are two factors which you have to allow for when comparing the price. The first is the exchange rate between the Australian dollar and the US dollar. The second is that Australian pricing quoted to consumers always has to include the GST, while US pricing never includes state-based sales tax.

Grabbing suggested exchange rates from Google for today (which won't necessarily be the exchange rates at launch but will serve well enough for discussion), the $US399 price for the PS4 becomes $422, while the $US499 price for the Xbox One becomes $528. Add the 10 per cent GST to each price and the PS4 becomes $$464, while the Xbox One becomes $580.

In other words, you're paying an actual premium of about $20 for the Xbox One in Australia, and about $85 for the PS4. A $20 price gap doesn't seem entirely unreasonable, given the different costs of shipping to a smaller market, the need for a different power adaptor and the requirement for a separate safety certification. $85 is definitely stretching the point.

Ultimately, consoles aren't essential items; if you don't like the price being charged, your life will continue regardless. Don't accept that premium? Don't buy the product. In this case, Sony is clearly exploiting the Australian market more — but I suspect the generally more favourable reception for its launch means a lot of buyers won't care. Finally, remember this: the one thing you can be certain of is that both consoles will be cheaper in 18 months' time. Patience can be a virtue.

Cheers Lifehacker

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Comments

    Dear Angus,

    Don't sugar coat it. If I buy something from America, I get it TAX FREE. Then I add the 10% on for the Australian GST (if it's over $1000). If I ship in bulk, the shipping costs are negligible per unit.
    The XBone is a ripoff, but the PS4 is even worse.
    Let's not mince words here - Australians ARE being fleeced.
    Let me quote my last set of purchases from Amazon...
    Estimated Tax: AUD 0.00

    Whilst you see fit to double dip the tax costs, I don't.

      Yes, grey importing can potentially save you money -- but the claim I'm double-dipping taxes in the calculation is nonsense, as I didn't include US taxes in the calculation of what the Australian retail price would be. Your calculation isn't the Australian retail price, so it's not comparable. Retailers selling in Australia don't have the option of skipping the GST, and most people buying a console will buy it that way.

      Dan, your an idiot and don't understand how companies work, not only do they have to ship it to AUS they have to pay freight forwarders and staff within this country while also complying with the ACL.

      $20 is Microsoft being very very nice to Aussies while Sony is just stacking up the costs.

      Claiming its 'under $100 for tax free' is nice but when your shipping millions of the units in at once to then be forwarded on to suppliers and retailers and your saying $20 is over priced? Im sorry but you need to learn how companies work and who is actually between you and the manufacturing line...

        You cannot call someone an idiot whilst showing at the same time that you do not know when to use 'you're'.

      I would like to add to the many quotes and downvotes and say Dan Zammell, you really are a idiot and would you please move to America.

    #1 rule for profitable business, charge what the market will pay.

    We're a relatively affluent country, low population density and avid gamers. Per-capita a large percentage of us *pay* what they charge, why would they charge us less?
    its unlikely that we would buy more if they did...

      Correct. Basic economics, target your customers willingness to pay. We are a lot more willing to pay a higher price for electronics. This could be due to our wealth or the fact that over the years it has become common place in aus. Its really a win win for sony because the people who are willing to pay more in Aus will just buy it from their local store and those who aren't will buy from overseas. Either way sont makes money on you buying a PS3 regardless of if you agree with the price or not.

    Today's exchange rate is $1.05 making a $399 USD equivalent to $380 AUD adding 10% GST makes it $418 AUD.

    Which is about $20 as stated, but the rest of your numbers make no sense...

      About six to twelve months ago, this might have been the case, but the $AU is currently very weak versus the $US.

        Very weak? No. Not at parity or above, but not at the 65 cent levels I can recall.

      Where did you get the exchange rate from (because I need US money for my holiday) the current exchange rate is $1 AUD - $0.95USD.

        The exchange rate is not the same as currency exchanges will pay to change a currency. Currency exchange is quite complex because of supply and demand forces which change the value of a currency. A pure exchange rate excludes fees charged by currency exchanges available to ordinary people (even FOREX has fees, but as the transactions are much larger in value the fees are comparatively lower, millions of dollars with fees at tens of dollars).
        If you're going on holiday you should look at getting a pre-paid cash passport from a bank, or similar low fee money exchanges. Again these are banks and services like American Express.
        These institutions have to hold the currency and change a lot at the same time when they have an excess otherwise FOREX fees which you don't have to pay would be huge. The spot price of FOREX changes many times during the day so it isn't stable, the bank will give you daily rates which help protect you from these fluctuations. The reason it is relevant in this instance is because companies like Sony will be making transactions in the millions of dollars, not $399.

    Sensible response! Good job summarising the issues. The other thing is that American consumers will pay more at the point of sale when their tax gets added on too, so the price isn't really USD399 either.

    For Sony the Australian price has always been set based off the European price and not the US one. So €399 is benchmark to go off for figuring out a price point here.

    Your missing a key point in this: the console isn't releasing today. The US dollar has been creeping up for months. By the end of this year, it is very likely we'll be sitting at .8USD, which is a better reflection of our economy. This could all change of course, but Sony is probably what Sony is basing their fees on.

    If we're at parity when the console releases, and they still charge us more, this will be a valid conversation. Until then, we're just pissing in the wind.

      Sorry to correct you, but the falling $A is more of an overdue correction to falling commodity prices, loss of confidence in the strength of our economy and the slowing growth in China, rather than the strengthening $US.

      I haven't seen any reports saying it will go as low as 80 cents, although I have seen some saying around 90 cents. Even Commbank came out last week and said they expected 96 cents by the end of the year.

      Part of my job involves purchasing products in $US, so I have to keep a close eye on this sort of thing. :-)

    If you look at it, remove the GST and the price of the PS4 is $494 and the Xbone is $539. Yes it's still expensive compared to the US.

      Removing the GST would be entirely illogical -- the US price doesn't include sales tax either.

        Angus - I'm merely mentioning what the pre-GST price is. Most people do not understand that US prices do not include sales tax where as the AUS price has GST included. The reason for this is that the US have different sales tax rates by state (and different rates for certain goods and services) whereas in Australia its a flat rate for all.

        I have always said the high price on Sony electronic products (PS3, Vita, TV's, etc.) is because you're paying for the Sony badge (hence why I call it the Sony Tax). but that's just me (I know there are other factors and reasons)

        Which is why he was removing it, to compare pre-tax to pre-tax, seems logical to me.

    Actually it isn't quite bad. At the moment 1 usd = 1.06 aud. So 399 usd = 421.55 aud. You also have to include 10% GST and around 5% for duty since you could imagine the distributor ordering more than $1000 worth of stock. Therefore the total would be roughly around $485. Retailers are making a profit of $65. This also gives you warranty since you're buying it locally. It's not that bad when you think about it.

      wow you think retailers would be paying retail price? I very much doubt that. Surely the likes of JB and HN would be getting it at a wholesale rate, not at $399USD.

    items like this tend to be priced based on affordability to maximise profits for the manufacturers. In Australia we have a higher standard of living, less national debt, higher average household income - and we pay higher prices for EVERYTHING as a result. Consoles are no different to bottles of coke when it comes to international pricing (bottle of coke in Australia - $3.80, bottle of coke in the US - $1.60)

      But that doesn't wash when you look at PPP adjusted median household income. the US's PPP adjusted median income is higher, but we pay roughly 45% higher prices (PPP adjusted, of course). If your argument was correct, this would not be the case.

    Angus, I don't know why you are even replying to the people in this comment section claiming they have beat the system or that your article is wrong, such uneducated non-sense and it doesn't even warrant your time or effort in reply!

    The fact these people should realise is; in the USA the PS4 is $399 before tax and the US can tax at both state and federal level, while Sony is still charging Australia a little more than we would like it's not as bad as it seems.

    The PS3 was $999 at launch(trust me my wallet has never forgotten that one) and the PS4 is going to be $549 add that to the deals retailers will do here in Australia to get you in their door and I'm sure we can all grab a next-gen console at a reasonable price.

    Last edited 12/06/13 2:41 pm

    Let's not forget that our price ends up being better than the UK and Europe. We did all right this time around.

    PS3 is a bit rich, but X1 is a really fair conversion.

    GST, Shipping, generally higher overheads of doing business in Aus. Consider they have to take currency fluctuations and long term value into consideration too, they don't want to have to keep adjusting the price every time the AUD drops.

    Personally I'm happy with the price of the PS4 (not getting an Xbox One for obvious reasons). The PS4 launch price, compared to the PS3 price at launch, is a hell of a lot cheaper than I expected, and it's something I'm willing to pay.

    As for the difference between the AUS and US prices, it makes sense when you break it all down and think about it objectively. As already mentioned, the US price doesn't include tax, whereas the AUS price does. Then there's the costs to get the consoles here, as well as the manufacturing costs to make a console to suit us here in Australia (PAL, different voltage or whatever it is, and anything else I may be forgetting or just don't know about). Of course, if the difference was any more than it currently is, then I probably wouldn't be too pleased.

    Angus, I think you're actually underselling the Australia Tax impact. You've calculated the exchange rate on the US retail price, but it will be purchased into Australia at a lower wholesale price (unless Sony do all their own import/ wholesaling/ distribution here, in which case, the price difference is bordering on racketeering).

    Basically, it'll cost local distributors less than what you've quoted to get it to our shores, but the RRP is the same. And if the PS3 is anything to go by, there won't be a power adapter, so there's another saving.

      First of all, I'm pretty sure that the American retailers would be getting it at wholesale prices too, so your argument isn't just flawed... It's weird... :/

      "And if the PS3 is anything to go by, there won't be a power adapter"

      What... Are you talking about?

    As mentioned by @shane, we're still getting a much better deal than UK and the rest of Europe.

    Just to make it blatantly clear:
    €399 = AU$558.32
    £349 = AU$574.68

    At least those are today's figures. Regardless how how the figures measure up against the USD price, let's not pretend this is just an "Australia Tax"

    surprised no-one has mentioned buying one from the US and having it reshipped through www.shipito.com or some similar service.

    UK/Europe are a lot worse off than we are, I'm happy with the price.

    FINALLY, a to the point, sensible & accurate response. Angus you would do well by following ymode's advice re: responding to posts from people that clearly have no idea! Trying to educate fools only reduces your intelligence & the fool remains a fool. Also your earlier comment re: sub 65c AUD v USD could have been much more accurate (possible effect of behaviour outlined in my previous sentence perhaps); in 1999 the AUD was sub 50c to USD, an average laptop was $2k+ (versus $500 today, never mind inflation adjusted pricing or say the incredible increase in a PC's processing power) & people still "lapped" them up.

    Sorry to be a bit harsh. Frankly I am sick of the fact that we are living in an age of such unprecedented high tech & yet for the most part people are just getting dumber & dumber. But hey, don't worry (to all you dummies out there), just google it (seriously, at any rate it "might" increase the possibility of you not looking like so much of a dummie 'sic')!!!

    It seems like we just have a penchant for whining, and making baseless claims about how we are being price gouged without considering a multitude of socioeconomic factors. Most of these arguments just do a simple currency conversion and then decry about how we are being completely ripped off.

    Yes, there are things that are just absolutely ridiculous like the Adobe CS6 Suite, but this argument about the PS4 being overpriced in Australia doesn't really hold much water. I don't see the Europeans whining as much, and their prices for the PS4 when converted directly to AUD is dearer than our RRP.

    Sorry Angus to add to this discussion 9 months late but I just thought I should let you know the Sony/Oz ripoffs are continuing. The prepay price for the new HDRAS100VR Sony sports camera in the US is $299 in Oz $499. Allowing for the current exchange rate US$299 is ~A$330 add 10% for tax and you get to ~A$363 still $133 less than the Australian price. (BTW I suspect that US$299 has the US taxes included.)
    Attempting to justify local price markups against overseas pricing by blaming taxes etc just doesn't wash. The average Australian just knows he is being fleeced, knowing who is holding the shears makes little difference. We know that a US shopper has to shell out less from his pocket for the same item than we do. The overall effect of these markups is that people are driven towards grey importing leading to unemployment in Australia.

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