Software Engineer
Google Chrome

Price gouging?

There is a lot of talk about how Australians are overcharged for hardware and software items compared to other countries. The Federal Parliament has convened a Standing Committee on Infrastructure and Communications to investigate "price gouging" in the IT industry, particularly from the likes of Apple, Adobe, Microsoft, and other tech giants.

The United States is a particularly common source of ire, and many people point at US prices compared to Australia as evidence for gouging. There's a number of reasons why a straight price comparison with the US can be misleading:

  1. Australia has a fixed 10% sales tax applied to the vast majority of goods and services. This tax is included in the advertised price, meaning that the true price of something is actually about 91% of the price on the sticker.
  2. The US has a variable rate of state general sales tax that differs depending on your location. Some states, such as Alaska and Oregon, have no general sales tax. California has one of the highest total tax rates in the US, at 9.75%; very few states have more than 10% tax in total.
  3. Most importantly, almost all advertised US prices in stores and online do not include tax. The tax is added at the checkout or when finalising an online purchase. So when you see a camera priced at $600 in a US store, its true price will actually be somewhere in the region of $600 - $660, depending on the amount of tax applicable.
  4. Australia is a much smaller market than the United States, meaning that it's harder to achieve economies of scale in shipping and selling to an Australian audience. This means smaller price savings can be passed onto consumers due to sheer volume of sales.

For example, if you check out the US Apple Store, and add approximately 10% to the price of everything, you get nearly identical prices to the Australian Apple Store. Now, there may be an argument to say that the prices should be exactly identical, but maybe the Australian market is simply more expensive to service than the US on a per item basis.

This isn't to say that there isn't price gouging going on. Adobe's Creative Suite 6 Master Collection costs $2,599 in the US, but $4,344 in Australia! Subscription prices for the software are also 25% more expensive in Australia - $49.99 per month in the US against $62.99 per month in Australia. There's definitely something fishy going on here: software can be delivered for the same cost over the internet anywhere in the world, and tax differences don't account for such huge discrepancies.

Australians are certainly being overcharged for some things. But it pays to remember sometimes that prices are simply advertised differently in different countries.

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