Australian price gouging: is it what we think it is?

The Australia tax. We imagine it as some vast, groaning behemoth, barely able to move under the weight of its own corpulent avarice.

It sweats and farts, scratching at the places it can reach, while it shoves another piece of Australia pie into its fetid mouth.

But first impressions can be wrong. While our dollar may have been hovering around the parity level for some time now, retail prices are not as simple as "we want what they're having".

First, let's take a look at some of the factors that may influence higher prices in Australia.

Sales tax

When you see a retail price in the US, that figure is without sales tax, a percentage that gets added at the point of sale. These vary from state to state, but the national average is about 9.6 per cent. So that's one cost that you need to mentally add before making the price comparison, as Australia's sales tax is included in the retail price.

Property

Property prices vary all over Australia and the US; however, occupancy costs in Australia are significant. The Australian Government Productivity Commission quoted the Red Group submission in a report: "Rental costs are a significant impost for physical store operators, ranging from just over 2 per cent for JB Hi-Fi to in excess of 20 per cent for specialty retailers." In the US, because more retail space is available, rents are naturally lower.

This report (PDF) by retail specialist Michael Baker calculated that in 2009, occupancy costs in digital product retail was 9.6 per cent in the US and 12.8 per cent in Australia, on average.

If a brand has its own stores — and a lot of them — it will be paying more than brands that buy shelf space in stores like Bing Lee and JB Hi-Fi.

Staffing costs

Our US counterparts get paid quite a bit less than we do. The federal minimum wage in the US is US$7.25 per hour (although it can vary from state to state). In Australia, the minimum wage for a junior employee over the age of 20 is AU$15.59 per hour — 121 per cent higher.

Also, the average full-time weekly wage in Australia in February 2012 was AU$1047.20 — compared to the average weekly American earnings in the US for the same period, which were US$807.22 — around 25 per cent less.

Import tariffs

These are actually fairly competitive with the cost of US tariffs (PDF). However, due to our distance from manufacturing countries, compared to that of the US, and our much smaller population, shipping goods is more expensive here; 10 million units being shipped to the US will cost less per unit than shipping 500,000 to Australia.

Training costs

With tech products, sales staff and technicians need to be trained in operation and repair. Training and then employing those people costs more, due to the higher wages mentioned above.

Marketing

Advertising and marketing campaigns cost more in terms of human resources — those pesky wages keep coming up — and, on top of that, you have the cost of advertising space and resources.

Things get tricky, though, when the products are digital; when buying from the web, there is no GST to be applied, no store space to be rented and no shipping costs. Perhaps a small, additional percentage might cover the cost of local support staff, if required — but with the bypassing of other costs accrued by the import and sale of physical goods, we are scratching our heads for a justification for some software products on the Australian market.

Flick through the gallery below for some price differences on what Australia perceives to be some of the worst offenders. Maybe not all of them are as bad as you think. Then again, maybe some are worse.

Editor's note: all percentages were calculated on a conversion rate where 1 USD = 0.972180 AUD.