The New Daily

Why is everything in Australia SO expensive?

Anyone who has travelled overseas, or shopped online, will have first-hand knowledge of just how much more Australians pay for everything from electronics to cosmetics. But why, exactly, is this the case?

Empty pockets

The cost of things in Australia can leave your pockets empty. Photo: Shutterstock

By almost any measure, Australia is one of the costliest places on the planet.

The Economist Intelligence Unit’s (EUI) global cost-of-living survey, which compares 131 cities using New York as its baseline, ranks Sydney as the fifth and Melbourne as the sixth most expensive on places earth. That’s pricier than Tokyo, Geneva and Copenhagen. Brisbane and Perth are tied for 21st spot.

Thanks to the declining Australian dollar, we have fallen down the cost-of-living rankings a little this year – but our nation is still a very expensive one.

According to the latest data from Numbeo, a global database on living conditions, the cost of renting in Australia is 26 per cent higher than New Zealand and 36 per cent higher than the US. And Americans can stock their cupboards for 21 per cent less, and Kiwis for seven per cent less, than it costs us here.

So why, exactly, is Australia so pricey?

Houses

Housing

In his submission to the Senate Inquiry into Housing Affordability, Saul Eslake, chief economist at Bank of America Merrill Lynch Australia, blamed government policies such as negative gearing for inflating residential property prices while failing to promote the construction of new houses. This, in turn, had forced aspiring first-home buyers on to the sidelines.

Mr Eslake told The New Daily that Australia’s highly urbanised population was a further contributing factor.

Almost two-thirds of us choose to live in cities of over a million people – the highest proportion of any population in the advanced world after Hong Kong and Singapore – for which we pay a premium, he said.

Our concentration around the coast and our preference for relatively large houses on sizeable blocks of land were further contributing factors, he added.

Geo-blocking

Australians pay more than their fair share for technology and online entertainment because of geo-blocking, a policy that restricts our access to content based on geographic location. In other words, big companies charge us more because they can.

Tom Godfrey, head of media at consumer group CHOICE, said this frustrating reality means we often pay hefty mark-ups on products and downloadable content from companies like Apple, Microsoft and Amazon.

Australian consumers pay an average of 52 per cent more for iTunes music, 50 per cent more for PC games, 41 per cent more for computer hardware, and 34 per cent more for software compared with consumers in the USA, according to CHOICE research.

Thankfully, geoblocks can be circumvented. Third-party delivery services like Bendigo-based company Price USA allow you to buy products direct from America at local prices. Virtual private networks (VPNs) can also be used to open up Netflix, HBO and US iTunes accounts, which are usually blocked in Australia.

price-discrimination

Cosmetics and colognes

Australians are also paying a high price for beauty.

We splash out a premium for big brand cosmetics. For example, the Revlon Colourstay Ultimate Suede Lipstick costs $25.95 at David Jones, whereas in Walmart in the US the price is as low as $7.89 (not including US sales tax), according to a recent CHOICE report.

For men, the popular Giorgio Acqua Di Gio Essenza cologne (75ml) cost $125 at Myer, but only $68.53 at Nordstrom in the US (not including sales tax), CHOICE found.

Perfume

The tyranny of distance

When you read these figures, you could be forgiven for thinking that local retailers are ripping us off.

But part of the reason that Australians pay higher prices on retail goods can be explained by our distance from the rest of the world, Mr Eslake said.

Transport costs, and the need to stock greater quantities of products in case they run out, are both factors that drive up the price of cosmetics, colognes and many other foreign-made products.

Higher wages

The comparatively high hourly rates paid to Australian workers is another reason why we pay higher prices than elsewhere.

International data shows our labour costs have risen at a faster rate than in any comparable country besides Norway, Mr Eslake said. These higher wages, and more generous penalty rates, help to explain why our restaurant meals “are typically much higher than in other countries”, he added.

In other words, our waiters and waitress are paid better than in other parts of the world.

Petrol

Nic Moulis, CEO of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), said Australian petrol prices are comparatively low – the fourth lowest in the developed world after Canada, the US and Mexico.

But this is little consolation for motorists who are paying more and more for their fuel.

Mr Moulis said government taxes were partly to blame, with 36 per cent of the average petrol price over the last two years made up of GST and fuel tax. A further 52 per cent was made up of the cost of the petrol itself.

“The service station owner is making 2 cents [per litre] for selling petrol while the government is making 51 cents,” he said.

Screen Shot 2014-03-05 at 12.43.44 PM

Sparse population

Finally, we are a population that is spread out over a very large area, often with vast tracts of land in between.

The widely scattered nature of our population means that “we need to spend more on transport and more on inventories than a similar population on a smaller landmass would have to”, Mr Eslake said.

With all of that in mind, it doesn’t look like our prices will be falling any time soon.

cost-of-living

  • harry

    Simply lack of knowledge,I don’t know if to laugh or cry when people pay a million dollars for a house which in reality is only worth $200k at the most, considering the actual lifestyle in the area, and the price[$8 kg] of a capsicum in the supermarket.

  • Peter

    You forgot all the extra taxes we pay. Importing a product as a company you pay duties on custom inspections, freight forwarding fees, government additional duties on products of certain types, administrative fees and more. Often the price of a product here is only higher vs the USA for example due to all the gov taxes and duties.

    Importing electronic goods there are also compliance costs associated with products when you import as a company.

    Also when you compare prices to overseas, such as the USA, most products are listed ex tax and tax varies from state to state in the USA.

    The other main two are our wages and transport costs as you noted. Part of this also comes down to things such as the insurance costs you need when sending goods around Aust (shipping companies take no responsibility for damaged or lost products) as an example.

    Finally bring isolated with a population of only 23 million means that we can’t import in bulk like the USA can (350 mill). Often we barely meet the min requirements to import goods from a manufacturer so we pay a higher price. In some cases due to government standards requirements and that (for example) for electronic goods we run on a different voltage to many other countries, we pay extra to manufacturers for the shorter production runs and quantities made.

    • CGB

      Correct weight m8!

  • Jon

    I appreciate your hilarious writing style. “Blah, blah, blah… Australia is so expensive. By the way, here is link to an EUI report that costs $995.”

  • AussieInTX

    I moved to the US in 2003 when I married an American. I missed Australia so much for the first few years until we bought a beautiful 5 BRM house and pool on a double block in an exclusive suburb of Houston tx in 2009 for $180k. Now its worth $220k+ and even if I sold it and tried to move back here..what will that $220k get me? Absolutely nothing! I feel sorry for young Australians trying to buy the Aussie dream like we were able to do in 1982 when $60k bought you a brand new house and land in lovely new housing estates. They have no chance and all they are buying for half a million is a sweatbox in the burbs which look more like ghettos these days. I don’t understand how Australians have let it come to this. I can’t afford to come home even if I wanted to. Good luck Australia, you’re pricing yourself right out of the market and Australians are leaving in droves to attain the dream. There are plenty of ex pats living around the world in luxury and not looking back.

    • Gus Bedo

      Dude, ikr! My grandpa bought a house for 25k (with a pool) in the 70’s. The house is a piece of shit, and is in the worst spot ever (even though Hugh Jackman stayed next door to him for 2 weeks). Anyway, if they were to sell that house today, they’d get 3.4mil from it…. How crazy is that!

  • Kate

    seriously I don’t know were they get these figures from, they are so out of touch, rent alone in city $3000 per month with if your are lucky parking,,packet of cigarettes just basic winfield is $21.00, and going up. Most people I have spoke to Don” t work full time in sydney as full time jobs are hard to come by,like the rest of Australian cities, the average hourly rate here is between 17 to 21 Dollars the cost of food is ridiculously high compared to the rest of the world. The cost of Gas, Insurances,Taxes, Petrol, is day light robbery, What about taxis , they should be charged for criminal rip off. Anyone who says we should be lucky obliviously is young and hasn’t traveled the world, or raised a family, or been ill in their life, If you look back to the nighties income hasnt kept p with the cost of living, Let alone the cost of over inflated house Prices

    • Gus Bedo

      Cigarettes cost so much because they don’t want people buying them.

      • Dan

        If you actually believe that, you’re a very naive person.

        • Claire AwesomeSauce

          I don’t know about Australia, but here in the United States
          certain goods deemed over the years as being bad for your health have extra tax
          attached to them. These items range from alcoholic beverages to cigarettes. The
          idea is to try and price them up high enough to make people reconsider their usage
          of them, and give further incentive to break low intensity dependency as it is
          a large contributor toward impoverished living conditions. Saying that such
          taxation is there for the added revenue wouldn’t have as much ground to stand
          upon here given the exceedingly low taxation rates compared to other developed
          countries of similar Human Development. Increasing taxes tend to be associated with lower economic growth and loss of State and Federal revenue in the long run, and is a very difficult thing to accomplish.

  • Bruce

    My wife and I just got back from Australia and we had a fabulous time. Sydney, Brisbane, Caloundra, Cairnes, Canberra were a few of our stops. We have Aussie friends who live in Caloundra.. We were there for 3 1/2 weeks. It is without a doubt the most expensive place we have ever been too., First gas there is 6.25 a gallon after figuring the liters, as opposed to 3.50 here. Hamburgers are 15 to 18 dollars as suppose to 7 or 8 here in a non fast food place, Breakfast , Good Lord what is it about breakfast there? bacon eggs and toast is 18 bucks. Here any decent breakfast place you spend 5 to 6 bucks for that. Most of our decent hotel chains include continental buffet breakfast with the room. There it is 19. Then of course a large coke at McDonalds in a cup that is half the size of ours is 4.50 and 1.50 here and in the good ole USA you get free refills at any restaurant whether fast food or five star on coffee tea and soft drinks. Chinese food is so cheap here it isn’t funny. Normal meal with shrimp let’s say costs 10 dollars and you get all the rice you want for free. There 25 bucks and then 4 dollar for small bowl of rice. Also at every place here you get free bread with your meals and all you want. True there is no tipping there but it in no way makes up for it.

    Ok cars a toyoto camry here starts at 24000 there 37000. A BMW 300 series here is a young person’s is driven by 20 somethings. Starts at 35000 here 55000 there. You can lease one for 1000 down and 300 a month for three years. Mercedes S model 80000 here 200000 there. On and on

    Clothes such as Ralph Lauren are 40 per cent cheaper at our department stores and 60 per cheaper at our outlet stores.

    Fact is, I ran some comparisons on salaries between you and us for nurses, teachers, plumbers and doctors and there is no difference. Teachers here can retire after 30 years service with full benefits including medical. True the minimum wage is 15.00 to our 7.50 but the standard of living is the same because you pay twice as much for so many things. People making 15.00 must live at home with their parents and watch tv for entertainment. Sad really.

  • Pesist

    Don’t thank the unions for anything. They’re responsible for driving labour costs ie inflation up.

  • Andy

    One simply question: why there aren’t no players entering in AUS markets selling cheap goods? Why the chinese, which flooded the market of the whole world with inexpensive (and dangerous) goods didn’t managed to compete with such ridiculous prices? Maybe because Aus authorities blocked them?

  • pinkyanddabrain

    please explain why we are so OVER taxed, why our food, entertainment and housing costs are INSANE

  • pinkyanddabrain

    Please don’t misunderstand me, I love OZ, I have travelled the world, we live in a great country………just so damn expensive

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