Fair shake of the sauce bottle
August 21, 2010 8:43 PM Subscribe
Why are consumer products so expensive in Australia?
Compared to US prices. The average Australian earns about $60,000 ($53,000 US) and the average American earns about $40,000, so you'd expect our goods to be only about 30% more expensive than those in the US. Yet the vast majority of electronics products, for example, are 50-100% marked up, PCs and televisions in particular.
The same Levi's jeans which cost $40 in the US cost $90-$100 here. Cosmetics, jewellery, watches and other consumer products are similarly inflated.
A video game like Twilight Princess which is 4 years old still costs $99 here in store ($85 on discount), when new video games retail for $60-65 in the US.
It is actually cheaper for me to buy off Amazon in the US and pay for international shipping than to buy in Australian currency at an Australian bookshop. The cheapest media outlets I can find are UK online shops like bookdepository which are cheaper than Australian bookships' online shops.
It can't simply be efficiencies of scale, can it? Does anyone know why Australian consumers have so little purchasing power on these items?
Compared to US prices. The average Australian earns about $60,000 ($53,000 US) and the average American earns about $40,000, so you'd expect our goods to be only about 30% more expensive than those in the US. Yet the vast majority of electronics products, for example, are 50-100% marked up, PCs and televisions in particular.
The same Levi's jeans which cost $40 in the US cost $90-$100 here. Cosmetics, jewellery, watches and other consumer products are similarly inflated.
A video game like Twilight Princess which is 4 years old still costs $99 here in store ($85 on discount), when new video games retail for $60-65 in the US.
It is actually cheaper for me to buy off Amazon in the US and pay for international shipping than to buy in Australian currency at an Australian bookshop. The cheapest media outlets I can find are UK online shops like bookdepository which are cheaper than Australian bookships' online shops.
It can't simply be efficiencies of scale, can it? Does anyone know why Australian consumers have so little purchasing power on these items?
Because all these things are manufactured elsewhere and shipped a really long way? Are there locally produced items that you can substitute?
Is there a big duty on the electronic stuff?
posted by Ideefixe at 9:20 PM on August 21, 2010 [2 favorites]
Is there a big duty on the electronic stuff?
posted by Ideefixe at 9:20 PM on August 21, 2010 [2 favorites]
Ideefixe, it's further from China to the US than from China to Australia.
On the other hand, a lot more goes from China to the US, and there is probably a degree of economy of scale relating to shipping costs.
posted by Chocolate Pickle at 9:25 PM on August 21, 2010 [1 favorite]
On the other hand, a lot more goes from China to the US, and there is probably a degree of economy of scale relating to shipping costs.
posted by Chocolate Pickle at 9:25 PM on August 21, 2010 [1 favorite]
Yeah; it seems like the shipping would be a big deal - but at the same time - wouldn't most of it ship from asia anyway, so it would be shorter from china and japan. american made stuff would definitely cost more though.
iirc, aren't there heavy tariffs on a bunch of stuff as a protectionist measure there?
also, what ajr said, bunch of lazy gets :)
posted by ish__ at 9:28 PM on August 21, 2010
iirc, aren't there heavy tariffs on a bunch of stuff as a protectionist measure there?
also, what ajr said, bunch of lazy gets :)
posted by ish__ at 9:28 PM on August 21, 2010
Well, this is a pretty complex macroeconomics question. Basically you're asking a question about purchasing power parity (ppp): http://en.wikipedia.org/wiki/Purchasing_power_parity
posted by dfriedman at 9:30 PM on August 21, 2010 [1 favorite]
posted by dfriedman at 9:30 PM on August 21, 2010 [1 favorite]
Tariffs aren't nearly as high as they once were. I think many of them have been eliminated. It's something that I've wondered about, too. I think a large part is that we're a much smaller market than the USA, and what we perceive as being different products may really be imported or manufactured by the same business. That being the case, there isn't as much pressure to keep prices down.
posted by Joe in Australia at 9:30 PM on August 21, 2010
posted by Joe in Australia at 9:30 PM on August 21, 2010
a lot more goes from China to the US, and there is probably a degree of economy of scale relating to shipping costs.
The US is a huge market with significant purchasing power, and economies of scale that makes it easier to sell products for less. If it makes you feel any better, Canada has the same problem that Australia does.
posted by KokuRyu at 9:33 PM on August 21, 2010
The US is a huge market with significant purchasing power, and economies of scale that makes it easier to sell products for less. If it makes you feel any better, Canada has the same problem that Australia does.
posted by KokuRyu at 9:33 PM on August 21, 2010
In general, shops charge the retail price that the market will bear, rather than starting with the wholesale cost and adding a markup - though the retail price has to cover the wholesale price plus the sellers cost and a profit.
Until relatively recently, people in Asutralia had no option but to buy locally, and no way to sensibly compare prices internationally. We are also a small economy, so we would likely have been paying a higher wholesale price for imported goods (because of low purchasing power) and a higher wholesale price for locally made goods (because economies of scale weren't accessibly, as we seldom made products that the rest of the world wanted to buy). So people 'expect' prices to be what they are, and because the price is about what we expect, we pay it.
It's also interesting to note that the price of many consumer goods in Australia has dropped significantly in real terms. Prices may not be equivalent to the US price, but are still lower than they used to be. For example, I have on my bookshelf a copy of Dubliners printed in 1992 by Penguin, RRP $10.95; and a copy of The Great Gatsby, printed in 2009 by Penguin, RRP $9.95. Average weekly earning have more than doubled in the same time period, so Gatsby in effect was less than half the price of Dubliners.
posted by girlgenius at 9:36 PM on August 21, 2010 [1 favorite]
Until relatively recently, people in Asutralia had no option but to buy locally, and no way to sensibly compare prices internationally. We are also a small economy, so we would likely have been paying a higher wholesale price for imported goods (because of low purchasing power) and a higher wholesale price for locally made goods (because economies of scale weren't accessibly, as we seldom made products that the rest of the world wanted to buy). So people 'expect' prices to be what they are, and because the price is about what we expect, we pay it.
It's also interesting to note that the price of many consumer goods in Australia has dropped significantly in real terms. Prices may not be equivalent to the US price, but are still lower than they used to be. For example, I have on my bookshelf a copy of Dubliners printed in 1992 by Penguin, RRP $10.95; and a copy of The Great Gatsby, printed in 2009 by Penguin, RRP $9.95. Average weekly earning have more than doubled in the same time period, so Gatsby in effect was less than half the price of Dubliners.
posted by girlgenius at 9:36 PM on August 21, 2010 [1 favorite]
The import duties thing is complex, and can make for a substantial difference between the cost of goods privately imported from a country with which we have a free trade agreement versus the cost of exactly the same goods commercially imported from a country of manufacture with which we don't have a free trade agreement.
For instance if you buy Chinese made bicycle parts from the the US using the internet, and they're worth less than $1000, there's a high chance Customs won't even look at them. But if a company imports $100 000 worth of the same parts direct from China, there will be duties and inspection fees and so on.
This is a good place to start in working that stuff out.
posted by Ahab at 10:28 PM on August 21, 2010
For instance if you buy Chinese made bicycle parts from the the US using the internet, and they're worth less than $1000, there's a high chance Customs won't even look at them. But if a company imports $100 000 worth of the same parts direct from China, there will be duties and inspection fees and so on.
This is a good place to start in working that stuff out.
posted by Ahab at 10:28 PM on August 21, 2010
1) more middlemen (for example: apple products are more expensive outside the us. Adobe software normally costs 1.5x in europe than in america -- certainly not a transportation issue? Adobe claims it has added costs of business in europe.)
2) Exchange rates; there was a period about two years ago in which audusd was at 0.7; making everything in Oz roughly 30% cheaper.
3) A less competitive market mindset overall and a faster growing economy
posted by 3mendo at 10:41 PM on August 21, 2010 [1 favorite]
2) Exchange rates; there was a period about two years ago in which audusd was at 0.7; making everything in Oz roughly 30% cheaper.
3) A less competitive market mindset overall and a faster growing economy
posted by 3mendo at 10:41 PM on August 21, 2010 [1 favorite]
What is sales tax/VAT like in Australia? Is it possible that income taxes there are correspondingly lower?
posted by schmod at 11:10 PM on August 21, 2010
posted by schmod at 11:10 PM on August 21, 2010
Schmod: It's called the GST - Goods and Services Tax. It's a flat 10% passed up the supply chain - i.e., 10% of the original cost plus 10% of the profit at each stage. But income taxes are not lower - it's a progressive tax, rising to 46.5% of your income over A$180,000 (about US$160,000). There are no State income taxes, although there are various taxes on things like transferring real estate.
posted by Joe in Australia at 12:23 AM on August 22, 2010
posted by Joe in Australia at 12:23 AM on August 22, 2010
Response by poster: Thanks for the answers - good food for thought.
Ajr, I understand that the price of labor in Australia is much, much higher than in the US (our manufacturing workers get paid about 2 to 2.5x the US rate), but that shouldn't affect the manufacturing or sourcing of overseas goods like electronics and many consumer items. And though our lowest-paid workers are much better off than those in the US, the average consumer doesn't earn significantly more, so it's not like our supply-demand curve should be that drastically affected.
Tariffs have gone down since the 80s. There are import duties on books and other goods, so they would have a minor contribution to hte price disparity.
I suspect part of it is that we don't have the bargaining culture that the US does. We don't have a wal-mart that provides a baseline for all prices. In lots of areas (particularly clothing and higher end goods) there is no competition and veblen goods galore.
As for our income taxes, they are not lower than those in the US - our rates are 15/30/37/45 and kick in at 6000/34000/80000/180000 respectivel.
posted by kid A at 4:34 AM on August 22, 2010
Ajr, I understand that the price of labor in Australia is much, much higher than in the US (our manufacturing workers get paid about 2 to 2.5x the US rate), but that shouldn't affect the manufacturing or sourcing of overseas goods like electronics and many consumer items. And though our lowest-paid workers are much better off than those in the US, the average consumer doesn't earn significantly more, so it's not like our supply-demand curve should be that drastically affected.
Tariffs have gone down since the 80s. There are import duties on books and other goods, so they would have a minor contribution to hte price disparity.
I suspect part of it is that we don't have the bargaining culture that the US does. We don't have a wal-mart that provides a baseline for all prices. In lots of areas (particularly clothing and higher end goods) there is no competition and veblen goods galore.
As for our income taxes, they are not lower than those in the US - our rates are 15/30/37/45 and kick in at 6000/34000/80000/180000 respectivel.
posted by kid A at 4:34 AM on August 22, 2010
The same Levi's jeans which cost $40 in the US cost $90-$100 here.
That's mainly due to international market positioning as a luxury brand. Something similar applies to Blunnies in the US.
Elsewhere, there's some distortion from comparing prices with GST to American ones pre sales tax, which varies across (and within) states. I think girlgenius is right that there's a degree of expectation built into the retail market (which I've also seen in places like the Netherlands). And there's the basic point that the American economy is focused on delivering cheap consumer goods as soma.
posted by holgate at 6:46 AM on August 22, 2010 [1 favorite]
That's mainly due to international market positioning as a luxury brand. Something similar applies to Blunnies in the US.
Elsewhere, there's some distortion from comparing prices with GST to American ones pre sales tax, which varies across (and within) states. I think girlgenius is right that there's a degree of expectation built into the retail market (which I've also seen in places like the Netherlands). And there's the basic point that the American economy is focused on delivering cheap consumer goods as soma.
posted by holgate at 6:46 AM on August 22, 2010 [1 favorite]
Do goods made in China for foreign companies get shipped directly to the various markets? Shoes made in China for an American company get shipped back to the US for distribution, don't they, and then sent to wholesalers, retailers? Or do they go directly to retailers? Don't think so, thus, the extra shipping.
posted by Ideefixe at 10:39 AM on August 22, 2010
posted by Ideefixe at 10:39 AM on August 22, 2010
"Ideefixe, it's further from China to the US than from China to Australia."
It's further, but they're shipping so much more to the U.S., not to mention Canada too. The population of Texas is greater than the population of Australia, and Texas is just one of our fifty states, not to mention Canada and Mexico. Volume brings down costs.
"I understand that the price of labor in Australia is much, much higher than in the US (our manufacturing workers get paid about 2 to 2.5x the US rate), but that shouldn't affect the manufacturing or sourcing of overseas goods like electronics and many consumer items."
It almost certainly means imported goods that compete with your domestic goods are taxed like crazy, otherwise imports would wipe out your nation's manufacturers because the imports would be so much cheaper.
posted by 2oh1 at 9:37 PM on August 22, 2010
It's further, but they're shipping so much more to the U.S., not to mention Canada too. The population of Texas is greater than the population of Australia, and Texas is just one of our fifty states, not to mention Canada and Mexico. Volume brings down costs.
"I understand that the price of labor in Australia is much, much higher than in the US (our manufacturing workers get paid about 2 to 2.5x the US rate), but that shouldn't affect the manufacturing or sourcing of overseas goods like electronics and many consumer items."
It almost certainly means imported goods that compete with your domestic goods are taxed like crazy, otherwise imports would wipe out your nation's manufacturers because the imports would be so much cheaper.
posted by 2oh1 at 9:37 PM on August 22, 2010
The book situation is a little different. Australia had parallel import restrictions. Basically under the PIRs, if a novel or textbook is published in Australia within the 30 day limit, booksellers cannot import and sell stocks of the same book from, say, the UK, the US or Asia. This enables rights holders to charge prices (or obtain royalties) in the Australian market with the certainty that they cannot be undercut by commercial quantities of imports of the same titles.
Every now and again, the government talks about changing it, but its part of Australian copyright law at the moment.
posted by Lesium at 9:05 PM on August 24, 2010
Every now and again, the government talks about changing it, but its part of Australian copyright law at the moment.
posted by Lesium at 9:05 PM on August 24, 2010
This thread is closed to new comments.
posted by ajr at 9:06 PM on August 21, 2010 [6 favorites]