Tuesday, February 26, 2013

We're being ripped off?

There's an ongoing discussion here about why just about everything costs more in Oz than elsewhere.

I've been reading about it in newspapers and it's been the subject of several recent radio debates. There's even an inquiry going on in the House of Representatives into the amount the IT industry charges Australian consumers relative to other countries.

Apple has been formally ordered to appear before the parliamentary committee in Canberra on March 22. Microsoft and Adobe have also been ordered to appear before the committee.

If you google you'll get tens of thousands of pages listing all kinds of products that cost more here than elsewhere. You'll also find 'answers' to the question 'why?' but almost  all miss the point.

Unfair pricing, rip off, price gouging are the catchphrases.

They say the high prices are because of the cost of doing business here, the cost of freight, the small market, high taxes...

The real reason of course is actually very simple.  We live in a capitalist system in which the market rules and market forces apply, so companies charge as much as the market can bear.

In Australia we earn far more on average than comparable countries. We earn more, so why do we expect to pay the same or less than people who earn lower salaries?

Compare the US and UK for example, with conversion into Aussie dollars.  The minimum wage in Australia is $15.51. In the US it's $7.25, the UK $9.13. The average wage in Australia is $73,000pa. In the US it's $47,000, in the UK it's $39,100.

We earn almost twice as much, so relative to our earnings we pay much the same, even less in many instances, for stuff we buy. Companies' pricing is based on ability to pay, on what the market will stand.

1 comment:

Anonymous said...

Great analysis. Businesses wants to be successful and be as profitable as possible. Workers expect to be rewarded with bonuses and be paid well. Consumers are charged accordingly to meet expectations of both businesses and workers. A continuous cycle that feeds into inflation.