Dear Lifehacker, I’m looking at buying an ASUS U43 Bamboo laptop and found it on an Australian web site on special for $1,549.00. But the very same laptop on Best Buy in the US is $US829.99. Given that we are on parity with the US dollar, are there any valid reasons why Australians are paying double ? Cheers, Brendan
There’s a bunch of reasons why we’ve ended up with this price disparity, but the fundamental answer boils down to two simple facts: prices for goods that you buy don’t necessarily reflect the current exchange rate, and retailers will charge whatever they think they can get away with. You can’t do much about the first problem, but you can shop online in some cases to dodge the second. “Black Friday” sales in the US this week are going to make that especially tempting.
Price disparity between Australia and other markets isn’t a new issue. Even when we haven’t had near-parity, people have complained that the converted rate doesn’t reflect what they’d pay if they bought something overseas. That seems especially offensive in the case of digital goods (like music), where there aren’t any physical shipping costs involved.
But in most cases, the price for goods in a given market doesn’t reflect simply the cost of creating the goods plus a profit margin. They reflect the initial cost of production; shipping to different aprts of the world; deals done to offer “exclusive rights” in a given market; advance orders placed by overseas suppliers which assume a given exchange rate that turned out to be wide of the mark (arguably the biggest issue here); tax laws in different markets; and possibly other factors we’re not economically geeky enough to list.
Many of those assumptions might seem nonsensical in a world where you can order goods from anywhere in the world (assuming the supplier is willing). But change takes time, even in the rapidly changing Internet shopping dmarket. Differences in warranty support, power supplies and deviced configuration mean that notebook manufacturers can be somewhat confident that most bargain hunters will be scared off buying goods from overseas if they’re (a) pricey, (b) need plugging in or (c) seem likely to need warranty support. So they’re not going to change until they have to.
Parity has certainly made Australians more enthusiastic about shopping online, and we’ve offered tips on how to make that situation work for you. If shipping costs are non-existent or low, you can absolutely get many goods cheaper than in the Australian market, and in many cases there’s no reason not to do so.
Australian retailers aren’t happy with the current scenario, of course. Harvey Norman head Gerry Harvey is one of the most vocal voices in a campaign that argues that the current GST exemption for goods under $1,000 should be reduced to $400. But even knocking the GST component off your ASUS example wouldn’t make the local product even remotely competitive, so Gerry might have to try a bit harder if he wants to come up with a persuasive argument.
We’re not defending the current system, but the notion that prices should instantly reflect changes in the exchange rate is also a little naive, even in a world of just-in-time manufacture. If market economics prevail, eventually prices will make sense. But economists do often get it wrong: they’re producing hypotheses, and like any scientific hypotheses, their concepts can be disproved with sufficient contrary data. At least the Internet makes it easy to shop around while they squabble.
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