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Sunday, January 9, 2011

I'm born and raised in Sydney Australia, although i am increasingly looking to spend more time in San Francisco for work.

As a parent in a young family, we have to make a number of significant life purchases in the next few years (house for the kids, family car, laptops for wife and kids) as well as ongoingly purchasing consumer items for everyday life (shoes, clothes, books, food).

I can't get my head around this. My colleagues in the USA make similar incomes to Australian professionals eg Software Engineers and Accountants. So why is Australia so much more expensive?


Coke: Can 330ML


Malcolm Gladwell, Tipping Point


Nike Air Max 90
Weber BBQ Q120


HP Pavillion Laptop


Car: BMW 335i


House: 4 Bed


Hollywood Hills  Zillow


 Bellevue Hill Domain
Total Cost

When i first moved to San Francisco in 2000, this kind of made sense as the Aussie dollar was 50 cents to the USD, but todays rate is 1 Australian dollar = 0.9954 U.S. dollar.

Can someone please explain this to me?

Why is Australia effectively double the price for consumer goods when income is nearly equal and the exchange rate is near parity?

Surely the cost of manufacturing is near equal, so where is the difference going (government, retailers, importers)?

Based on this it seems that we can have a much higher quality of life in the USA (assuming healthcare is factored into job income). That said we do love the beach/sun lifestyle we have in Sydney.

I look forward to your thoughts?

Update: 10-Jan-2010

Wow thanks for all the comments and feedback, some great discussion on reddit with over 70 comments.

This post hit Page 1 on Reddit and #1 on /r/australia.

Clearly this post was not an exhaustive study but it is interesting and i have enjoyed the discussion. Thanks for all your feedback and time.

On a more positive Australian note, ill tell you what is pretty damn well priced for us Sydney Locals... A Sunday afternoon spent swimming and sunbathing on Coogee beach with the family for free!


Posted by Nick HaC @ 1:25 PM

At January 9, 2011 at 3:00 PM, Anonymous brownie said...

I was having this exact discussion with a friend visiting from Portland two nights ago. He was surprised how expensive FMCG were in Australia. I was, unfortunately, completely unable to explain the reason behind it. I need answers too Hac!

At January 9, 2011 at 3:25 PM, Blogger Paul Montgomery said...

Perhaps it's something to do with the lower award wage in the US, added to the fact that so many workers in the US are illegal and are paid below award wages. Plus it also has something to do with the high cost of shipping in Australia, with our uncompetitive ports.

At January 9, 2011 at 4:05 PM, Anonymous Mitch said...

Who cares, it's worth it because we don't have to live with 300 million Americans.

At January 9, 2011 at 4:23 PM, Blogger istara said...

It's only a few years ago that the Australian dollar sank to 50 US cents. It recently passed parity with the US dollar. Because this is a small, cut-off, captive market, the benefits of the stronger dollar just haven't been passed on.

Things have and will always cost more here, because of the lack of economy of scale, compared to the US.

But you're right - Australian consumers are being ripped off in many ways - but now the dollars are at parity, people can actually see this, before their eyes. So there will be change.

Housing (buying and renting) is a different issue, that is due to supply shortages and infrastructure issues in many areas. This situation will take a decade or more to resolve, unless there is a major recession/depression, or a major event like a war/plague.

At January 9, 2011 at 6:40 PM, Anonymous Anonymous said...

A certain percentage of the increased prices we pay are based upon an island economy - the vast majority of what we consume is imported at great distance(either as raw materials or finished goods). Combine that issue with the economies of scale that are in place in america based upon the size of their consumer population in comparison with the same consumer population in Australia, and those are two of the root causes. Add to that the higher cost of wages and conditions in Australia, you've got a significant portion of your cost mark up right there.

At January 9, 2011 at 8:25 PM, Anonymous Anonymous said...

I don't think it's the exchange rates. I think we've just been fleeced. Retailers have stretched the friendship as far as they possibly could. We've had the wool pulled over our eyes for years about their margins & we've put up with it because we had no other option. Now the internet has made our geographic isolation insignificant. We've discovered just how badly we are being fleeced by comparing stuff online and we have other options for buying rather than just locally. The truth has come out & for once the buyer has the power. I hope they've got the message now.

At January 9, 2011 at 9:49 PM, Anonymous James said...

I was talking to some people in music importing (print music) and they were saying the reason it's so expensive in Australia is that importers price it based on the lowest point the Australian dollar ever reaches, so even if the dollar were 2USD, they'd still price based on 56.7c or whatever it was when they floated it.

I'm not sure if that's the same for all areas, but I can imagine that it might be something similar.

At January 9, 2011 at 10:26 PM, Anonymous Richard Searle said...

Its very much inportant to take into account economies of scale here, that is domestically produced goods and services created for two very differently sized populations are created at different cost per item, this also applies to imported goods as well.

so the price to produce, or import to the australian market with a population of approx 22 million people, versus the 300 million in the US dictates the the cost will be less in the USA

Another thing to take into account is wages, now you mentioned that for your friends, who are mostly professionals, the salaries are similar. For low to middle income earners the difference in pay between the US and Australia is much greater (i.e. lower in the US and higher in Australia), for instance minimum wage for a fulltime adult in Australia is around $15/hr, whereas its much lower (as I understand around the $6-7/hr mark)

these two things greatly affect the price of goods within the market. Thats not to say that as an Australian myself, I dont feel ripped off when I see the prices of things in the US

At January 18, 2011 at 5:50 PM, Anonymous Adam @ SitDownDisco said...

Everyone has their own theory, but my theory is twofold. Firstly, it's about relative productivity of the economy in Australia. Productivity is influenced by a range of things, but at the lower end of the food chain, it's about wages. When you have to pay a checkout chick and shelf-stacker $18/hr, you're groceries are going to be more expensive. The other part of this productivity equation is that there is allegedly a massive illegal immigrant economy in the US which drives down the cost of doing business meaning getting things done is cheaper across the board and this filters through all parts of the economy.
The second part of the equation is that when the exchange rate fluctuates in Australia's favour -- that is we have greater purchasing power in other parts of the world, we need to exercise it. The problem is that we choose to use the likes of Harvey Norman to exercise our purchasing power on our behalf and it's clear to all that many of the large retail corporations in Australia are not passing on these savings to consumers. It's an absolute crock when looking at things like ipods and other electronic gear.

So, in order to ensure that there aren't millions of VERY poor people in oz, fortunate Aussies take a hit on the price of a can of coke. Then the retailers slam you on ipods. Part one I'm OK with, part two not so much.

At March 2, 2011 at 6:15 AM, Anonymous Anonymous said...

I am an Aussie living in Texas. I just bought a Samsung 55" LED 3-D 8 Series tv for USD $2050 (inc. tax). Last night, out of curiosity, I wanted to see what that bad boy cost in OZ. The cheapest I found it was Aud $4460. So glad I do not live in Australia.

At August 29, 2011 at 7:18 PM, Blogger Stephen said...

Bottom line is you expect items to cost little bit more as its exta shipping all way down here....but not double the price and especially not double in one of the most taxed countries in the world

I was looking at Webber BBQ for fathers day
In US its $270..... in Australia its min $700
Unless i can get one sent from the states im screwed

Bottom line is a small amount is extra postage to send to Australia. the other 90% price hike is just plain greed!

And everyone is wondering why everyone is buying online now? 60min did story on it this week. Good I hope all the shops go bankrupted! People who will do well is business are the ones who dont take advantage and offer value

PS: also someone said its to do with the size of the population.... this is not true - i work and live in Dubai, UAE now and its a tiny country - prices are same as US

At October 12, 2011 at 10:42 AM, Anonymous Anonymous said...

the truth is there are not many producers in australia as a percentage of population,therefore government has to regulate industries or own them outright,railways,electricity,water etc,just to provide services to the people,and industries left are now controlled by gov regulation, and anything that is run by gov always costs many times more than private enterprise,these costs filter through everything we buy,i believe that there are 7 million cetrelink customers,add that to public employees,school children etc,even the cost of government,there arnt many people actually paying the bills,maybe you are right,get out now.

At October 17, 2011 at 12:35 AM, Anonymous Anonymous said...

Re: Weber BBQ prices. The price that weber sells to Australian retailers is already marked up - largly due to the smaller demand and consequential small purchacing power in Australia and simply because they can, as their products are highly desirable. Retailers in Australia typically only have a 10-20% mark up on Weber branded products if they are charging webber's Australian RRP.

At December 20, 2011 at 10:51 PM, Anonymous Anonymous said...

I'm using online shopping from Australia now to purchase goods from camping equipment to kitchen appliances. And books, of course. Generally, the items are 30 - 50% of the price of the same goods in Australia. A sleeping bag that sells for $400 in US will be $900 here - ridiculous. I'd like to support local manufacturers / retailers, but how can you justify it? I'd rather give my money to worthy charities!

What really annoys me though is that some brands will not allow their products to be sold from overseas to Australia.They're all pretty much made in China anyhow, so labour/production cost is not the issue. Is it a conspiracy to milk the Australian, highpaying consumer? Where there is an Australian supplier, charging absurd prices, the overseas parent company will not sell you the product or allow you to buy it via Amazon. US sellers will not ship it to Australia. Why?? The local retailers must hate it too! These products, if I really want them, I just buy when I travel. But it's annoying.

At January 16, 2012 at 6:49 PM, Anonymous Anonymous said...

I just bought a set of Hankook tyres made in Korea,Aussie price $225 each USA. price $117 each. next time I will also buy on the net.


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