Australia To Grill Apple And Microsoft Over Price Gouging

This is all rather a jolly story. A committee of Australia?s House of Representatives is going to call in people from Apple and Microsoft to make them explain why prices are higher in Oz then they are in the US. A question which really shows us the mindbogglingly low level of knowledge of Australian politicians rather than anything else:

Members of the Australian Parliament have been looking into whether residents of the country pay an unfair premium on electronics and related services since last year, and now two of the biggest names in technology have been called to testify on the issue. The Standing Committee on Infrastructure and Communications in Australia?s House of Representatives released a memo today stating that it had called Apple, Microsoft, and Adobe to speak at a public hearing on March 22rd.

In slightly more detail:

?In what?s probably the first time anywhere in the world, these IT firms are now being summoned by the Australian parliament to explain why they price their products so much higher in Australia compared to the United States,? said ruling Labor government MP Ed Husic, who helped set up the committee.

Heaven help us.

So, in the list of things that we?d rather like a politician to know and understand:

1) A company will always charge the highest price it thinks it can get away with. If they think they can charge higher prices in Australia then they will.

Of course, ?as high as possible? is tempered by all sorts of considerations. Will customers actually pay it? What?s the competition like? What are our costs? Will the customer still respect us in the morning?

But it is simply a basic and foundational supposition about a capitalist world: producers will charge as much as they can.

2) Are costs higher in Australia? Actually, yes, they are. Low end wages are significantly higher in Australia than they are in the US. So are land prices (I know Oz is empty, but everyone lives in the few nice bits on the coasts) and thus the costs of offices, warehouses and so on.

3) I did hugely enjoy this price comparison:

At current exchange rate one Australian dollar buys $US1.03. Yet Australians often pay more in Australian dollars than Americans are charged in their currency.

An example of the discrepancy can be seen in the price of a 16GB WiFi iPad with Retina Display. In the USA the fondleslab costs $US499. In Australia it?s $AUD539.

Australian prices are quoted inclusive of the country?s GST. That?s a 10% VAT for those who do not know. US prices are always quoted without local sales taxes (largely on the grounds that there are so many variations that it?s easier to add them at shipping, rather than in the advertisement).

Once you correct those two numbers for the exchange rate then the pre-tax price of both are about 1% apart. Which isn?t a bad level of accuracy when that exchange rate changes each and every day.

So the really short answer to our politician is that Australian prices are higher than US because Australia charges taxes in a way the US doesn?t. Something which we really rather would expect a politician to know.

But for this we need a committee inquiry. And the reason that the citizenry hold politicians in contempt is what pray?

Source: http://www.forbes.com/sites/timworstall/2013/02/11/australia-to-grill-apple-and-microsoft-over-price-gouging/

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