Rising Price of Living in Australia

[Guest The Pom Queen]

When mental health researcher Laura Dainton Smith, 28, moved back to Australia last year after 12 months in the US, she was jolted by the prices of daily essentials like clothes and food.It wasn't so much that the prices in Australia had gone up much in the year she and partner Will spent living in Providence, Massachusetts. It was more that they'd become used to the cheaper US prices - and paying so much extra for the same items hurt.

 

 

''Clothes, food, alcohol, make-up, it's often half the price over there,'' Dainton Smith says. ''We have to plan and budget a lot more carefully to be able to have the things that we could take for granted in the US.''

This week, a Deutsche Bank report illustrated what many suspect - whether catching public transport, ordering a beer or buying medicine to battle a cold, Australians pay among the highest prices on the planet.

 

 

The report, which tracks the prices of an array of goods and services in cities and countries around the world, found that Melburnians and Sydneysiders pay almost 40 per cent more for movie tickets than Manhattanites and Parisians, for example, with cinephiles in Wellington and London paying only slightly more.

 

 

Pick up a two-litre bottle of Coke at a supermarket in Melbourne or Sydney and you'll pay almost 50 per cent more for the sugar and caffeine concoction than in Berlin or Auckland. Planning on ordering mum a bunch of roses for Mother's Day? That will cost you about $US139 ($134), more than in any of 16 other countries tracked by the survey.

 

 

The Deutsche report uses prices in New York as a baseline, and converts all prices to $US. It echoes the findings of the Economist Intelligence Unit's annual Worldwide Cost of Living survey, which ranked Sydney and Melbourne as the third- and equal-fourth most expensive cities in the world to live.

Ten years ago, not a single Australian city was in the top 10.

 

 

It's a stark demonstration that - eight years since the mining boom took off, and more than two years since the Aussie dollar breached parity with the greenback - Australia has become one of the most expensive places in the world to live.

Or, in the words of Choice chief executive Alan Kirkland, it ''shines a bright light on how much we are being fleeced''.

 

 

Ask why Australians pay so much more and the answers vary depending on the item - and the person answering the question. For example, Australia's high taxes on tobacco help explain why a cigarette in Australia costs more than in 27 other countries - $US17.22 for a pack of Marlboro compared with $US1.10 in Manila, Deutsche says.

 

 

The cost of a pint of beer in Australia is the third-highest among 17 countries. According to the Australian Hotels Association, taxes make up about about 20 per cent of the cost of a beer served in a pub.

But while alcohol and tobacco attract higher taxes, Australia has low import tariffs compared with Europe and the US, making it ''hard to know'' why imported goods are so much more expensive, says economist Stephen Koukoulas.

Koukoulas, managing director of Market Economics, suspects that the cost of transporting items to Australia and around this vast continent may still be a factor in price differences.

 

 

But Choice believes that many companies charge more for products in Australia simply because they can. ''It is about marketers deciding what is the highest price they can charge,'' Kirkland says.

''Australians have historically paid more for a whole range of goods … but in many cases when you put it to the test the increased cost of selling in Australia just didn't hold up any more.''

According to the Deutsche Bank report, Australians pay 26 per cent more for an iPhone than US consumers, and 13 per cent more for an Apple Macbook. Choice has been campaigning against price discrimination in IT products and services, the subject of a parliamentary inquiry in Canberra.

But the good news is that even if they pay more, Australians are paying less than they used to for imported items such as clothing, shoes and cars.

 

 

Australia is now the equal-third cheapest of 17 countries in which to buy a pair of adidas sports shoes, Deutsche Bank found, with the price having dropped by more than $US5 in 12 months. A pair of Levi's jeans bought in Melbourne may still be almost double the price of the same pair bought in New York, but they are still cheaper than in Paris, Hong Kong and London.

The high dollar has increased Australians' purchasing power, and competition from online shopping has helped force down prices of products such as make-up and clothes.

 

 

This week's Consumer Price Index data found that the prices of tradeable goods - such as pharmaceuticals, vegetables and tobacco - fell by 1.2 per cent in the March quarter.

But the figures also showed that the cost of non-tradeables like restaurant meals, shoe repairs or education rose 1.3 per cent. The Deutsche research confirms that many things that cost a lot more in Australia - such as hotel rooms, a flower delivery or a beer in a pub - involve labour, reflecting Australia's high wages.

Chris Morris, whose Colonial Leisure Group owns a portfolio of Australian pubs and restaurants and a conference and wedding venue in Dorset, England, says labour costs are a big factor in inflating the price of a beer. He warns of the impact of penalty rates and high wages on the competitiveness of Australia's tourism and hospitality industries, which struggle to convince Australians to spend their mighty Aussie dollars at home.

''People come here and say, 'What? Ten dollars for a pint of beer! It's three quid in the UK','' says Morris, who estimates that Australian labour would cost, on average, three times more than in Britain.

But the higher wages mean that, in many cases, Australians can actually afford to pay the higher prices, Koukoulas says.

 

 

Wages in Australia are about 50 per cent higher than in the US or New Zealand, and average weekly earnings have risen roughly 3.5 per cent a year for the past five years. Australian wages have outstripped inflation for more than a decade.

''[it costs more here] to pay a person to sit in a retail shop or to operate a website or to distribute an item. It is not necessarily a bad thing but a high income, high cost country shows up in the prices that we pay,'' Koukoulas says.

''If you want to pay the same as what Americans are paying, then accept American wages. You can't have the low prices without the low incomes.''

​

 

Saul Eslake, chief economist at Bank of America Merrill Lynch Australia, says the Deutsche report would have been more useful had it compared prices of items as a proportion of earnings in each country. This would show how affordable or expensive each item was for a person earning the local currency.

But he says the Deutsche report - and others like it - should serve as a reminder of the challenges facing the Australian economy, including how it will compete against lower-cost countries.

Australia may have high wages, ''but that doesn't lead me to say that the answer is to cut wages,'' Eslake says. ''If this relatively high wage structure is to be sustained, without adverse consequences for employment, then we need to boost productivity.''

 

 

 

 

Read more: http://www.theage.com.au/data-point/rising-price-of-living-in-australia-20130426-2ik16.html#ixzz2RhZb8ldI

[Peach]

[h=1]Yes, Australia is expensive but there are fringe benefits if you live here[/h]AUSTRALIA is one of the most expensive places in the world, according to a survey by the investment bank Deutsche Bank. Aussies pay top dollar for beer, cigarettes, iPhones, hotel rooms, Levi Jeans, movie tickets, flowers - you name it.

But the news might not be as bad as you think.

It is inherently hard to compare the price of goods in different countries because there is so much local variation in the quality of the goods. How sure can we be that we are comparing apples with apples?

Beer for example, can be premium or standard. Deutsche Bank's survey found Australia was the third most expensive out of 17 countries surveyed to buy a pint of beer at an "average bar".

Read: Deutsche Bank survey found Australia was the third most expensive

It will depend very much if that bar is in the city or the suburbs, for example: Japan's most popular beer is Asahi Super Dry, but the because that is not a standard beer around the world, the survey measures the price of a Guinness or Kilkenny in a Japanese bar.

Why? Because these are the sorts of compromises researchers have to make when trying to compare prices across countries.

Again, when the researchers wanted to compare car prices, they had to pick a particular model and brand to compare. They picked the Volkswagon Golf. But the Golf is not sold in India, so the researchers took the price of a Polo and increased it by 34 per cent, which is the price difference in England between a Golf and a Polo. You can start to see how the figures might be open to error.

Even a Big Mac, as it turns out, is not always a Big Mac. In India, it is called a Maharaja Mac.

When it came to hotels, the researchers looked only at the price of 5 star hotels (we should all be so lucky) and Sydney emerged as the most expensive at $US933 a night.

At which hotel? According to the footnotes of the report, the researchers compared prices at the Hyatt Regency for one night's stay in mid November. November is getting into high season for tourism in Australia, while it is winter in the Northern Hemisphere. That could explain the high prices.

And anyway, savvy hotel bookers know that there are often websites that offer last minute deals and significant discounts. But researchers are unlikely to have investigated that for every country, using the rack rate only.

Make no mistake, the report is a rich source of information about prices in more than 50 countries. Much of it came from a website called expatistan.com.au - a website where people intending to move countries can pay $29 for a report to show them the different in the cost of living and use this information to bargain for a pay increase.

It works by having users upload information on prices of taxi fares, Big Macs etc in their home town. According to the website, it has around 614,000 prices entered by 155,500 users in 1,478 cities. That's a lot. But it's far from perfect. You don't know if people have paid a discounted price or a ticket price. It is open to human error.

To compare prices across the board, the researchers take prices in local prices and translate them into one currency - in this case the US dollar - at current exchange rates.

And here I come to my next alarm bell. The dollar.

Everyone knows that the Australian dollar has been very strong recently, having doubled in value against the US greenback over the last decade.

Australia is a very expensive place for foreigners to come to at the moment and this shows up in surveys like the Deutsche Bank survey.

But for Aussies living here, earning Aussie dollars, buying Aussie products with Aussie currency, it doesn't make a difference. And we we get a great benefit if we do take those Aussie dollars and go buy products in foreign currencies.

So you have to take such surveys with a pinch of salt.

But having said all that, it does appear true that Australia IS a relatively expensive place to live.

The main trade off is that we are also a high wage country. There is a reason why India is the cheapest country for many products - wages are very low in India.

High wages are a cost to business that must be passed on to customers as higher prices. Businesses in Australia also pay high commercial rents thanks to planning restrictions and the high cost of land.

And the tyranny of distance has not gone away - it is more expensive to ship goods to Australia and then to transport them around this vast land of ours.

Still, it could be worse.

The pace of price inflation has, in fact, slowed since the global financial crisis.

The higher dollar has helped us to import cheaper goods, putting a lid on prices. Prices have gone up a lot on some domestically produced items, like electricity and gas. And anything that is made by Australians, like education services, health care, hair cuts and restaurant meals are more expensive because of wage rises.

Being a high wage, high cost country is not a bad thing. When you pay a high price, you're paying the wages of someone who will go off and buy something that pays the wages of someone else, maybe even yours. And so the economy goes round and round.

The main problem with being expensive is not for us, but that we have become an expensive place for foreigners to visit and for foreign businesses to buy our exports.

We need to make sure that we are producing products of sufficiently high quality to justify the price, or foreign customers will go elsewhere.

[h=3]What we pay[/h] $US2042: Cost of a basic health insurance policy in Australia, cheaper than the US, but more expensive than all 16 other countries surveyed.

$US28: Cost of a standard men's haircut in Australia. India has the cheapest cuts at $US3.19 and Tokyo the most expensive at $US44.57.

$US17: Cost of a pack of Marlboro cigarettes in Australia - the most expensive ciggies in the world.Manilla is the cheapest place to buy cigarettes at $US1.10 a pack.

$US17: Cost of a movie ticket in Australia, one of the most expensive tickets in the world. Cheapest is Mumbai at $US3.93 per movie.

$US38,500: Cost of a new Volkswagen Golf 2.0 TDI with no extras in Australia. In New Delhi you pay just $US18,577 but in Singapore you pay $US110,381.

$US139: Cost of a bouquet of 12 classic red roses delivered to your loved one's door step in Australia - the most expensive place in the world to make such a gesture.

$US116: Cost of a pair of Levis 501 jeans in Australia, the third most expensive after Moscow and Paris.

$US70: Cost of a pair of Adidas Super Star 2 sports shoes in Australia - the third cheapest in the world after China ($US50) and India ($US64)

$US8.20: Cost of a pint of beer served in a bar Australia - the third most expensive in the world after France and Singapore.

$US3.55: Cost of a 2 litre bottle of Coca Cola in Australia - the most expensive Coke in the world.

 

http://www.news.com.au/money/cost-of-living/yes-australia-is-expensive-but-there-are-fringe-benefits-if-you-live-here/story-fnagkbpv-1226630603809

[newjez]

But with the high exchange rate things should be cheaper. Someone is ripping you off. What will happen when the dollar falls?

[Guest Ptp113]

Helps in keeping the riffraff out!

[Harpodom]

this:

 

But Choice believes that many companies charge more for products in Australia simply because they can. ''It is about marketers deciding what is the highest price they can charge,'' Kirkland says.

''Australians have historically paid more for a whole range of goods … but in many cases when you put it to the test the increased cost of selling in Australia just didn't hold up any more.''

[NicF]

this:

 

But Choice believes that many companies charge more for products in Australia simply because they can. ''It is about marketers deciding what is the highest price they can charge,'' Kirkland says.

''Australians have historically paid more for a whole range of goods … but in many cases when you put it to the test the increased cost of selling in Australia just didn't hold up any more.''

 

There is definitely an element of this in the prices. It used to be the same in the UK as well - you charge more because you want customers to think a product is a quality product rather than because it costs more to produce. Things have changed a bit in the UK with the increase in online shopping and a general increase in being able to compare the competition. You still see it with certain things but it's not across the board. In Australia though there just seem to be too many people prepared to accept and pay higher prices for things that aren't any better than the cheaper things elsewhere. If you look at what K-mart and Target charge for clothes and compare that with some of the other clothes shops around there is a huge difference, but I doubt there is the same difference in quality. It's the same for a lot of household goods as well. Not everything obviously, but a lot of stuff.

[Bromney]

I do believe Aussie consumers are, at times, simply ripped off. Take a look at what you get charged for some software, these are things you download on line (after paying) so there aren't even shipping costs involved!

 

Until consumers vote with their feet not much will change. Huzzah for online consumerism!

 

I recently bought a PS3 game from the UK via online, saved myself $40 with delivery.

[ali]

But still people come despite the expense .... maybe we should all leave? .... Last one out shut the door!!

[newjez]

What sort of comment is that Ali? Are you adopting the 'like it or leave' philosophy that is so sadly entrenched in many Australian? People are just saying don't get ripped off. Use the net. Import from overseas. If traders don't charge a fair price, bypass them and they soon will. It worked in the UK, it can work in Oz. Hell, you could even set up and import wholesale business. They are easy to do using the net. You can even sell on e-bay. Shop around, save yourselves some money.

 

 

But still people come despite the expense .... maybe we should all leave? .... Last one out shut the door!!

Edited April 28, 2013 by newjez

[Guest chris955]

The problem is I often hear that higher wages offset the higher prices but that only helps those earning the higher wages and it is why we are seeing an increase in low earners struggling to make ends meet and pay rapidly rising power bills for example.

Edited April 28, 2013 by homewardbound588
Spelling..doh

[starlight7]

They are missing out now because everyone is buying things on the net. Eventually prices will be forced down. You can see it happening already with unseasonal sales etc. and a lot of the big shops are now desperate for business. A shame they are so greedy because we all lose out in the long run as shops start to go under.

[Petals]

Must admit I shop on the web all the time just bought three pairs of shoes from the USA and a handbag, why exorbitant prices here.

[Peach]

It worked in the UK, it can work in Oz.

 

You consider the decimated UK high street as the way forward? I like having shops and people having jobs :wubclub:

[Guest guest76088]

Watch out for protectionist moves such as tariffs, accusations of dumping, attempts to control brand distribution and other barriers.

Many people visit shops now just to touch and feel the large-ticket items before ordering online.

 

Watch also for suppliers that refuse to service or support goods that were not bought from them or imported.

 

BigD

 

They are missing out now because everyone is buying things on the net. Eventually prices will be forced down. You can see it happening already with unseasonal sales etc. and a lot of the big shops are now desperate for business. A shame they are so greedy because we all lose out in the long run as shops start to go under.

[newjez]

You consider the decimated UK high street as the way forward? I like having shops and people having jobs :wubclub:

Steam trains are quaint. I often go for a ride on bluebell line. But they are no longer a means of transportation.

[Peach]

Steam trains are quaint. I often go for a ride on bluebell line. But they are no longer a means of transportation.

 

I still think UK town centres are looking pretty sorry..

[MACDONALDO67]

Are there not import tax charges when ordering from the UK or USA or do you ask the sender to tick the "gift" box? :laugh:

[Red Rose]

Question to those currently in Oz: does the quality of life in Australia compared to the UK still make the rising price of living there worth it?

[Peach]

Are there not import tax charges when ordering from the UK or USA or do you ask the sender to tick the "gift" box? :laugh:

 

Unless the item is worth more than $1,000 no duty is due.

[Peach]

Question to those currently in Oz: does the quality of life in Australia compared to the UK still make the rising price of living there worth it?

 

I think so, in the UK I had 10 years of being squeezed and watching jobs going offshore and businesses collapsing (as well as costs going up). Here everything is still ticking over nicely.

[MACDONALDO67]

Unless the item is worth more than $1,000 no duty is due.

 

 

Well that's Dandy.

 

A few years ago, in fact it was around 2000, I ordered a pair of Oakley Half Jacket glasses from the USA and the customs slapped a tax charge on the import. I got the glasses for something around £40 but the tax was about £15 to £25 so it worked out I might as well have not bothered.

[Peach]

Well that's Dandy.

 

A few years ago, in fact it was around 2000, I ordered a pair of Oakley Half Jacket glasses from the USA and the customs slapped a tax charge on the import. I got the glasses for something around £40 but the tax was about £15 to £25 so it worked out I might as well have not bothered.

 

You got lucky the couriers now pay it for you and slap on an admin charge.

 

Here the retailers want the $1000 limit reduced to much less, to disuade people from buying overseas.

[Guest guest76088]

Note the value includes the shipping cost.

 

​BigD

 

Unless the item is worth more than $1,000 no duty is due.

[northshorepom]

Watch out for protectionist moves such as tariffs, accusations of dumping, attempts to control brand distribution and other barriers.

Many people visit shops now just to touch and feel the large-ticket items before ordering online.

 

Watch also for suppliers that refuse to service or support goods that were not bought from them or imported.

 

BigD

 

There's a strong protectionist streak here but a lot of the actual legislation/barriers were dismantled by Hawke and Keating 20 years ago. A few pockets of it remain, and an awful lot of rhetoric/media & net chatter. Protectionism seems like a great idea to most people, after all what's wrong with keeping money and jobs in the country? Trouble is it only ever works (even when it does) in the short term, a bit like taking that bishop in a game of chess without any thought as to what's coming 1, 2 3+ moves down the line

 

In the long term it always fails. Witness the different experiences of the computer (hardware & software) industry in the US and the car industry in the same country. The former as a new invention was never "protected", but mainly through the innovation and dynamism of a bunch of bright young things in and recently out of unis (many of whom were also 1st or 2nd gen immigrants of course) and close contacts between unis and the nascent industry, it became, and remains, a world leading centre. It's only in the manufacture of hardware, the lower value added stuff, that they have essentially outsourced the work but most of the profits are still made in the US. OTOH the car industry was protected against competition from (better) imports and all it did was make the industry even weaker, make their products relatively even more behind, and allow them to maintain unsustainable cost bases so the whole industry end up sucking on the government teat. And the cars are still crap

 

Some bloke called Smith wrote a book on it 250 years ago. I recognise it's pretty turgid stuff about people making pins and the like, but the lessons still hold. I realise orthodox economics is suddenly unfashionable because a few people have lost their shirts or a few sleeves in the past few years, but it doesn't mean it's suddenly all wrong.

[newjez]

They are, but this is more the effect of supermarkets that the digital age. But you can even beat the super markets at their own game by shopping around. The digital age is a revolution, and it will change our world. The high street as we know it won't exist in ten years time. If it wants to exist, it will have to become more service centred, and for services which can't be ordered online.

 

I still think UK town centres are looking pretty sorry..