The Australia Tax Part V: Putting it all together

In the final article in this series, I'll put together all the information looked at thus far.

In the first article, I used a few case-in-point examples to opine that we do pay substantial price premiums in Australia for a number of products.

In the second article, I looked at exchange rates. It is obvious (though that data is a bit out of date now; the Australian dollar has retreated substantially of late) that the Australian Dollar is a very volatile currency, and retailers may try to build a worst-case scenario into their pricing to avoid having to adjust prices repeatedly.

Then there's the issue of wages. A key issue here is that wages in Australia are high even by developed-country standards, and that they always need to be paid in local currency. So the high cost of labour for Australian-based staff (especially relevant to department stores) will always add a premium to the price. And this premium will be in Australian dollars regardless of how the imported cost of a product changes. This can severely limit the margins by which retailers can adjust their pricing.

Next, I looked at real estate. Using data from CBRE in that article, it is easy to conclude that rents in Australia are very high. 

Lastly, the issue of whether the Australian consumer can actually pay more. In most cases, and having some knowledge of economics (being a qualified accountant myself), this can be a key issue in determining pricing for local markets for a number of products. 

There's a couple of key measures used for the 'average' income. The median income is a good one (I'm not going into the technicalities of why and how). Australian Bureau of Statistics in this publication has the average income at $58,817 per year (scaled from $1128 per week by a factor of 52.143). 

Median income is harder to come by, but this article in ABC RadioNational says it's about $55,000 or thereabouts. They peg the mean average at AU$75,000.

Whichever way we look at it, it's obvious that Australians earn quite a fair bit. According to NATSEM, the average Australian household has a median disposable income of $43,100 in US Dollar equalised terms. More extensive comparison of household incomes is very difficult because of the differences in exchange rates and purchase parity.

Which essentially means this in laymen's terms: we earn a substantial amount of money.

So all-in-all, a volatile exchange rate, high wages, high rents, and the consumer having more disposable income make for a recipe where we end up with more load on out credit cards when buying things. But more income means we don't necessarily have trouble keeping up with it.

Does this mean I endorse or condone high pricing beyond what can be reasonably explained by all these factors? No. And a lot of products are still priced at levels where even all these factors combined dont account for the entire difference in price.