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How Microsoft, Apple and Adobe are stealing from Australians

If you live in Australia, you will know that in return for sunshine, beaches and red rocks, you get pay the ‘Australian Tax’ on most things that you buy. Its a price premium for, well… being in Australia.

The arbitrary nature of this price premium is laid most bare by the pricing of software from suppliers like Microsoft, Apple and Adobe. Yesterday these American software corporations were subpoenaed to appear before the Federal Government’s IT price inquiry to explain what looks like blatant price gouging.

The evidence is pretty compelling and it makes consumers like me cringe at the premium we have to pay for legal software and music downloads.

 Price comparison of common software downloads from Australian and US stores
Supplier Product Australian Price US Price Australian Premium
Microsoft Office 2013 Professional A$ 599.00 US$ 399.99 +50%
Adobe Photoshop Elements 11 Upgrade A$ 122.38 US$ 79.99 +53%
Apple iTunes – single song A$ 2.19 US$ 1.29 +70%

Note: Australian premium assumes an AUD/USD exchange rate of 1.00 . Australian dollar is currently stronger so premium is higher than indicated.

Is there justification for the ‘Australian Tax’?

On most physical products, a supplier could mount a strong argument that Australian prices should be higher

  • Labour costs are higher: the minimum wage is A$15/hr versus US$8.00/hr in California
  • Distribution costs are higher: there are larger distances between cities than in the US
  • Retail costs are higher: apart from labour, property costs are also higher as I showed in this post
  • Marketing costs are higher: the market size is smaller yet the country physically larger making physical marketing less efficient
  • GST (goods and services tax) is 10% in Australia, usually less in the United States

On software downloads however, there can be little justification to hide behind except for GST.

  • The Australian product costs no more to produce than the American version – indeed the marginal cost of production is negligible given its electronic form
  • No labour is required to generate each additional sale, and even if it was it is probably administered from a single location globally so there should not be a price differential
  • No physical store is required to carry out the retail transaction
  • Marketing costs should be similar since most of it is done online and is consistent across countries

Let’s hope the government and competition regulator gets some teeth and pulls these corporations into line

 

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