Unless the Australian government somehow proposes to impose price controls, markedly higher taxes or other ways of turning the power of persuasion into the persuasion of power, it’s hard to see what the current IT pricing inquiry is going to achieve.
The ABC has a great write-up of the inquiry thus far, noting that Apple and Microsoft have refused to attend, with Choice Magazine unable to find any real reason why the costs are so much higher in Australia other than because the companies in question are able to charge those prices while making it hard for Australians to purchase from cheaper overseas locations.
The AIIA has released a document entitled “downloadable and online prices reflect Australian costs”, saying that price differences for Australians and overseas purchased products “reflect, among other factors, the different operating environments of countries and also the more robust consumer protection given to consumers in Australia”.
Obviously, when it comes to digital media, like Toy Story costing AUD $24.99 on the Australian iTues store but only $10 from the US Store, the media companies are doing some kind of major price gouging, but in a free market, people and companies are legally free to charge what they like, and you are free to be as clever as you want to be in legally purchasing from overseas.
Naturally, it would be nice if there was uniform pricing around the world, but let’s not forget than just a few years ago, one Australian dollar only purchased US 49c.
That’s a big change from where we are today, and the higher prices we have also reflect the fact our currency fluctuates and can do so wildly sometimes. Today $1 Australian dollar buys US $1.047, but this parity business is still quite recent, and with Australian taxes, insurances, wages and more higher than in the US, the cost of doing business isn’t exactly cheap in Australia, even if Choice Magazine says it doesn’t see much reason for price differences.
In addition, the US has seen its dollar drop in value by over 30% in the last few years. Many companies still rely on the US for big sales, despite the rise of China, and especially since the financial troubles in Europe that have seen many European wallets slam shut (while ours are still much more relatively open), and many non-US customers are simply subsidising the US.
When it comes to business, unless you’re making money, you’re out of business.
While it’s obvious that the AIIA is going to want to stand up for its members, some of whom are obviously charging a greater price for Australians than is done in the US, this is just what the market will bear and the cost of doing business.
After all, as the AIIA points out, a Big Mac burger is $1.89 in India, and $8.06 in Switzerland – a 426% difference as “The Economist” Magazine explains.
As long as companies are not doing anything illegal – and as long as efforts to actively prevent Australians from being able to make legal purchases of goods and services overseas (and paying whatever sales taxes or customs-applied GSTs are applicable) are not ramped up fiercely against Australians trying to freely spend their money – then we may see that the market has decided it cannot bear these higher prices, and we may see this public naming and price shaming have some effect.
But if we see government inquiries imposing price controls or moving in that direction, we may find the intrusion a bit too much to bear, and companies far less willing and able to help in the face of direct state intervention.
Anti-competitiveness and secret collusion is one thing, but just because our dollar is suddenly at parity with the US does not mean all else is suddenly equal – there are still many hurdles, licensing deals, business realities, costs, wages, taxes, insurances, freight costs, localisation and more that are realities for businesses to deal with.
In a perfect world, no-one would pay too much for anything ever and in fact, everything might even be free – we’re talking a perfect world, after all.
But in today’s world with today’s harsh economic realities, you can’t expect global companies not to take advantage of customers and their ability to pay for goods they need if they can get away with charging some parts of the world a higher price than others, so some parts of the world help smooth out others and vice versa.
As long as consumers can vote with their wallets and let their choices do the talking, this will be most important price signal from consumers to companies of all, and a signal that you can’t take all of the people for fools all of the time, because ultimately, your customers will desert you and you’ll end up with nothing.
Let’s not forget either that companies such as Apple and Microsoft now both have OS upgrades at cheap prices, with Microsoft going for the $14.99 upgrade price point for the first time ever – without any of Ed Husic’s help, but simply because market realities demanded it.
The power of the market is always greater than the power of government, even if sometimes government seems to have the upper hand. It’s very nice that there is an IT pricing enquiry going on, but it seems more sound and fury signifying nothing to me than much of anything else.