No easy fix to IT price gouging

The IT price inquiry highlights structural weakness in our economy where we have become a price taker both in the domestic consumer sector and bulk export industries.

Earlier this week, ABC Radio 702 asked me to comment on Adobe, Apple and Microsoft being summonsed to appear before the Federal Parliament’s IT Pricing enquiry.

As has been widely reported, the committee has asked the software giants to explain why there are such price differentials between Australian and overseas prices.

By way of example, Adobe Creative Suite 6 is available on the company website for $US1299 which is $1263 on today’s exchange rate. The listed Australian price is $1974 – a mark-up of 56 per cent.

This is not new

Australia has long been an expensive place to buy things, I remember my parents in the 1970s asking relatives to send over Marks and Spencer underwear as prices in Melbourne were so expensive.

Books and music have long been overpriced, the publishing industry openly printed the price of books in various countries and the Australian price has always been substantially higher than UK and US charges given prevailing exchange rates.

The high exchange rate has focused attention on the high prices; while the Aussie dollar was low consumers were tolerant of the rip-off. With the Aussie dollar high, consumers are wondering why the prices of many imported goods, particularly software, have remained so high.

A lack of competition

One of the biggest reasons for Australians being overcharged for many items is the lack of competition in the domestic marketplace. Most distribution channels are dominated by one or two players which lends itself to price gouging in areas ranging from technology to food.

A good example of this is the brewing industry; a revealing Fairfax article examined the Australian beer sector and exposed the failings and lack of competition in the market which results in the multinational duopoly extracting five times the profits of local retailers.

The conservative nature of Australian consumers is their own worst enemy as locals, including corporations and governments, prefer to buy major brands rather than experiment with local or lesser known providers.

Where alternatives exist, the price differentials rapidly fall. The price differential for an iPad is far less than the software apps that run on it. The reason for this are the range of alternatives available to the Apple product.

If Australian buyers were to explore open source alternatives, smaller suppliers or locally developed products then the prices of imported goods would fall.

Structural weaknesses

The pricing inquiry illustrates the structural weakness in the Australian economy where the nation has become a price taker both in the domestic consumer sector and bulk export industries.

Where Australia finds itself is an expected consequence of a generation of economic policies which favours debt driven consumer spending underpinned by selling assets and raw commodities.

Hopefully Australians are realising the price of software is just one of the consequences of current policies and start demanding the nation’s political and business leaders have a clear vision for what the country’s role will be in the 21st Century.

If that vision for Australia is a quarry with a few retirement homes clinging to the edge, then we’re well on the way to achieving that. At least software prices will be the least of anyone’s worries.

Paul Wallbank is a business technology writer, broadcaster and blogger and author of eBusiness: Seven Steps to Online Success. Read more of Paul's thoughts here.

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