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Having moved from California to Australia a year ago, the main thing we're finding exceptional about Australia is the high cost of living. IMO the Australian e

by jbarham 15y ago

Having moved from California to Australia a year ago, the main thing we're finding exceptional about Australia is the high cost of living. IMO the Australian economy is currently being squeezed in a vice between the insane property bubble and the resources boom and high Australian dollar making other sectors of the economy uncompetitive. Western Australia and Queensland (i.e., the two minerals states) are the only two states showing any significant growth. Australian retail, especially e-commerce, is completely uncompetitive compared to the U.S. Try picking a product at random from www.toysrus.com.au and compare the price on Amazon and even after international shipping it will almost always be much cheaper to just buy from Amazon. E.g., Megatron Transformers toy: $70 in Australia (http://www.toysrus.com.au/popular-boys-toys/kre-o-transformers-megatron/w1/i1197374_1193603/ http://www.toysrus.com.au/popular-boys-toys/kre-o-transforme...) vs. $25 at Amazon (http://www.amazon.com/KRE-O-30688-Transformers-MEGATRON-SET/dp/B004PHTXW0 http://www.amazon.com/KRE-O-30688-Transformers-MEGATRON-SET/...). It's almost as if Australian e-commerce sites depend on their customers not having heard of the internet...

scythe 15y ago
http://en.wikipedia.org/wiki/PPP_per_capita http://en.wikipedia.org/wiki/PPP_per_capita When comparing income by country, you need to take into account cost of living, yes. This index I've linked does that; Australia is at parity with the richer countries in Europe, but behind the US, Switzerland and Norway.
thmcmahon 15y ago
Yes Australia has a higher cost of living than the United States, and recent high commodity prices have pushed up our exchange rate. However, if you are comparing prices across currency, then a lot of what you are seeing is due to a higher exchange rate. If you had moved to Australia in the early 2000s, you would've felt rich. Inflation is not currently a problem in Australia. See: http://www.wolframalpha.com/input/?i=aud+to+usd http://www.wolframalpha.com/input/?i=aud+to+usd Re: the property bubble. House prices in Australia are high compared to historical levels. However, as this article from Crikey describes, Australian wages have risen too. While median house prices are still at a higher level compared to median wages (see: http://economics.hia.com.au/media/House%20price%20to%20income%20ratio%20-%20FINAL.pdf http://economics.hia.com.au/media/House%20price%20to%20incom...), they have been soft and in some cases reducing this year. They haven't 'burst' in the way the US housing bubble did. The differences between Australia and the US where you had a massive house bubble are numerous. * Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages. * Australian housing market has good fundamentals - our population growth has been quite high (due to overseas migration, like yourself!), and in most areas there is an undersupply of housing (with exceptions like the gold coast). I think you are overplaying the negatives in Australia, in general everything is working quite well as this convincing piece from Crikey shows.
- brc 15y ago
  * Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages. This is completely untrue. The extent of sub-prime mortgages isn't the same, but it exists nonetheless. As does the existence of RBMS, which the government continues to purchase from the banks. All of that looks over the fact that the big 4 banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property. In some ways it's worse than the USA because the mortgages are still on the books rather than being sold off into the secondary market. The differences between the Irish housing bubble and the Australian housing bubble are actually much less. So you're right to say that there the parallells between the USA and Australia are less, but the parallells between Ireland and Australia are few. Ireland has full-recourse mortgages like Australia. Ireland had a massive overinvestment in property, like Australia. Ireland had high immigration, like Australia. As I've said elsewhere in this thread, I don't think there is ever a time when you take your eyes off the negative.
  - thmcmahon 15y ago
    I agree that Australia shouldn't become complacent, and I agree that housing is historically highly priced in Australia, I just don't agree that we are looking at a catastrophic bubble. Ireland and Australias' levels of net migration aren't comparable either. See: http://www.wolframalpha.com/input/?i=ireland+net+migration%2C+australia+net+migration http://www.wolframalpha.com/input/?i=ireland+net+migration%2...
  - Nick_C 15y ago
    > banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property As opposed to what, though? Historically housing and small business loans were the raison d'etre for being a bank. It is only the last few decades where they have been allowed to invest in other areas. I think you are overplaying the exposure to housing. Our tier capital requirements were and are much more onerous than in the U.S. We (our central bank and treasury) have been telling the U.S. for two decades that their banking system was broken, and we were proven right. You can't compare a U.S. bank to an Australian one, they are very different beasts.
robryan 15y ago
I don't think it is really a fair comparison to compare a traditional retailer dabbling in online to what else is available online. The traditional retailers play on Australians traditionally expecting to pay more for the same products. As the internet has opened up commerce these kind of companies wouldn't survive for long.
brc 15y ago
>It's almost as if Australian e-commerce sites depend on their customers not having heard of the internet.. That's exactly what it is. They pretend they don't exist, or that somehow what you get is inferior. Historically, it's because the Australian dollar was weaker (after the last minerals boom bust) and therefore imported goods were more expensive. The retailers built their business models on higher margins, and now are struggling to compete with the disruptive influence of international e-commerce. I'm not expert on retail but I suspect the problem is with too many middlemen - importers, wholesalers, and the like. But instead of trying to work out why/how to compete, they are starting to run to the government looking for intervention. One of the few retail chains doing well is Supercheap, which has BCF and Goldcross bicycles (and probably some others). They seem to be able to be cost-competitive with international prices on many things and are still profitable. To me, there is no reason why an Australian e-commerce site couldn't be more successful. ebay is wildly successful in Australia, so it's not like people are averse to purchasing online. It's more to do with woeful range and prices. If Amazon ever decides to open up an Australian subsidiary with warehouses located in Australia they will wipe out entire retail chains. As it is, they're already knocking them about badly even with inflated international shipping and long lead times.
- jacques_chester 15y ago
  > If Amazon ever decides to open up an Australian subsidiary with warehouses located in Australia they will wipe out entire retail chains. Amazon, IIRC, refuse to do so because of the ban on parallel importation of books.
  - jbarham 15y ago
    And we all know how well that worked out for Borders Australia. E-books obviously make import regulations of books irrelevant so I don't think Amazon would bother setting up a retail operation in Australia. But if Amazon Web Services set up shop down under, well now, that would be quite disruptive!
    - jacques_chester 15y ago
nikatwork 15y ago
Oz retail imports are controlled by a bloc who artificially inflate prices to line their own pockets. Which is why Oz online (overseas) shopping has exploded over the past two years. I sincerely hope it forces the local market to become competitive.
twelvechairs 15y ago
What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive.... This is what holds back Australians from not ordering more online, especially at Amazon...
- jbarham 15y ago
  I didn't miss anything: my most recent purchase from Amazon cost $11 in shipping and arrived in less than a week. I have a USD credit card, but even if you pay w/ a AUD card the currency conversion is instantaneous and costs maybe a couple of percentage points. Shipping is often cheaper from outside of Australia than it is within Australia (http://www.malcolmturnbull.com.au/blogs/malcolms-blog/barriers-to-e-commerce/ http://www.malcolmturnbull.com.au/blogs/malcolms-blog/barrie...) which creates more of an incentive to shop internationally. Where goods are purely digital (e.g., Amazon Kindle or O'Reilly e-books) the whole discussion around shipping costs is obviously moot.
  - daemin 15y ago
    In addition (I've done many orders from Amazon) I find that even though Amazon estimates 4-6 weeks for delivery, the package(s) are here in 2 weeks.
    - twelvechairs 15y ago
      Okay - I cant argue with that. My last experience with amazon Aus was 5 years ago, but that was terrible (V. expensive shipping, and item arriving long after 'estimated' arrival time). Perhaps they have picked up their game now, but I know there are others like me with a negative experience that has discouraged future use of Amazon in Aus... Shipping costs may have been reduced too, but Im sure they are still much greater than other countries...
- nl 15y ago
  What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive http://www.bookdepository.co.uk/ http://www.bookdepository.co.uk/ Free (and pretty fast) shipping to Australia, better prices than Amazon, and a good catalogue (No association other than a happy customer).
vacri 15y ago
One thing to keep in mind when comparing cost of living: minimum wage. In the US, minimum waqe is about US$7.50. In Australia, it's about US$15. Your McValue meal is $1-2 cheaper in the US, but the minimum/low wage worker (the bulk of the workforce) has to work for less time to get that meal in Aus. Until the e-commerce boom of the last 5-10 years, this disparity wasn't much of a problem, as economies were much more localised. I'm not saying it's the complete answer (thankfully, I'm not an economist), but it's one of the most overlooked factors in all these analyses: the buying power of the poor.
- deleted 15y ago
  [deleted]
- keeperofdakeys 15y ago
  If you think about those who work in the food industry in the US, they depend on tips to get back the rest of that money. Unlike the US, you aren't obliged to tip in Australia.
  - vacri 15y ago
    $7.50 is just the straight minimum wage, regardless of industry (varies from state to state). Hospitality workers in the US earn less than that (think I heard one say it was about $2.50). US Dept of Labour says federal min wage is $7.25: http://www.dol.gov/dol/topic/wages/minimumwage.htm http://www.dol.gov/dol/topic/wages/minimumwage.htm

by jbarham 15y ago

scythe 15y ago

http://en.wikipedia.org/wiki/PPP_per_capita http://en.wikipedia.org/wiki/PPP_per_capita When comparing income by country, you need to take into account cost of living, yes. This index I've linked does that; Australia is at parity with the richer countries in Europe, but behind the US, Switzerland and Norway.

thmcmahon 15y ago

Yes Australia has a higher cost of living than the United States, and recent high commodity prices have pushed up our exchange rate. However, if you are comparing prices across currency, then a lot of what you are seeing is due to a higher exchange rate. If you had moved to Australia in the early 2000s, you would've felt rich. Inflation is not currently a problem in Australia. See: http://www.wolframalpha.com/input/?i=aud+to+usd http://www.wolframalpha.com/input/?i=aud+to+usd Re: the property bubble. House prices in Australia are high compared to historical levels. However, as this article from Crikey describes, Australian wages have risen too. While median house prices are still at a higher level compared to median wages (see: http://economics.hia.com.au/media/House%20price%20to%20income%20ratio%20-%20FINAL.pdf http://economics.hia.com.au/media/House%20price%20to%20incom...), they have been soft and in some cases reducing this year. They haven't 'burst' in the way the US housing bubble did. The differences between Australia and the US where you had a massive house bubble are numerous. * Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages. * Australian housing market has good fundamentals - our population growth has been quite high (due to overseas migration, like yourself!), and in most areas there is an undersupply of housing (with exceptions like the gold coast). I think you are overplaying the negatives in Australia, in general everything is working quite well as this convincing piece from Crikey shows.

brc 15y ago
* Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages. This is completely untrue. The extent of sub-prime mortgages isn't the same, but it exists nonetheless. As does the existence of RBMS, which the government continues to purchase from the banks. All of that looks over the fact that the big 4 banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property. In some ways it's worse than the USA because the mortgages are still on the books rather than being sold off into the secondary market. The differences between the Irish housing bubble and the Australian housing bubble are actually much less. So you're right to say that there the parallells between the USA and Australia are less, but the parallells between Ireland and Australia are few. Ireland has full-recourse mortgages like Australia. Ireland had a massive overinvestment in property, like Australia. Ireland had high immigration, like Australia. As I've said elsewhere in this thread, I don't think there is ever a time when you take your eyes off the negative.
- thmcmahon 15y ago
  I agree that Australia shouldn't become complacent, and I agree that housing is historically highly priced in Australia, I just don't agree that we are looking at a catastrophic bubble. Ireland and Australias' levels of net migration aren't comparable either. See: http://www.wolframalpha.com/input/?i=ireland+net+migration%2C+australia+net+migration http://www.wolframalpha.com/input/?i=ireland+net+migration%2...
- Nick_C 15y ago
  > banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property As opposed to what, though? Historically housing and small business loans were the raison d'etre for being a bank. It is only the last few decades where they have been allowed to invest in other areas. I think you are overplaying the exposure to housing. Our tier capital requirements were and are much more onerous than in the U.S. We (our central bank and treasury) have been telling the U.S. for two decades that their banking system was broken, and we were proven right. You can't compare a U.S. bank to an Australian one, they are very different beasts.

robryan 15y ago

I don't think it is really a fair comparison to compare a traditional retailer dabbling in online to what else is available online. The traditional retailers play on Australians traditionally expecting to pay more for the same products. As the internet has opened up commerce these kind of companies wouldn't survive for long.

brc 15y ago

>It's almost as if Australian e-commerce sites depend on their customers not having heard of the internet.. That's exactly what it is. They pretend they don't exist, or that somehow what you get is inferior. Historically, it's because the Australian dollar was weaker (after the last minerals boom bust) and therefore imported goods were more expensive. The retailers built their business models on higher margins, and now are struggling to compete with the disruptive influence of international e-commerce. I'm not expert on retail but I suspect the problem is with too many middlemen - importers, wholesalers, and the like. But instead of trying to work out why/how to compete, they are starting to run to the government looking for intervention. One of the few retail chains doing well is Supercheap, which has BCF and Goldcross bicycles (and probably some others). They seem to be able to be cost-competitive with international prices on many things and are still profitable. To me, there is no reason why an Australian e-commerce site couldn't be more successful. ebay is wildly successful in Australia, so it's not like people are averse to purchasing online. It's more to do with woeful range and prices. If Amazon ever decides to open up an Australian subsidiary with warehouses located in Australia they will wipe out entire retail chains. As it is, they're already knocking them about badly even with inflated international shipping and long lead times.

jacques_chester 15y ago
> If Amazon ever decides to open up an Australian subsidiary with warehouses located in Australia they will wipe out entire retail chains. Amazon, IIRC, refuse to do so because of the ban on parallel importation of books.
- jbarham 15y ago
  And we all know how well that worked out for Borders Australia. E-books obviously make import regulations of books irrelevant so I don't think Amazon would bother setting up a retail operation in Australia. But if Amazon Web Services set up shop down under, well now, that would be quite disruptive!
  - jacques_chester 15y ago

nikatwork 15y ago

Oz retail imports are controlled by a bloc who artificially inflate prices to line their own pockets. Which is why Oz online (overseas) shopping has exploded over the past two years. I sincerely hope it forces the local market to become competitive.

twelvechairs 15y ago

What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive.... This is what holds back Australians from not ordering more online, especially at Amazon...

jbarham 15y ago
I didn't miss anything: my most recent purchase from Amazon cost $11 in shipping and arrived in less than a week. I have a USD credit card, but even if you pay w/ a AUD card the currency conversion is instantaneous and costs maybe a couple of percentage points. Shipping is often cheaper from outside of Australia than it is within Australia (http://www.malcolmturnbull.com.au/blogs/malcolms-blog/barriers-to-e-commerce/ http://www.malcolmturnbull.com.au/blogs/malcolms-blog/barrie...) which creates more of an incentive to shop internationally. Where goods are purely digital (e.g., Amazon Kindle or O'Reilly e-books) the whole discussion around shipping costs is obviously moot.
- daemin 15y ago
  In addition (I've done many orders from Amazon) I find that even though Amazon estimates 4-6 weeks for delivery, the package(s) are here in 2 weeks.
  - twelvechairs 15y ago
    Okay - I cant argue with that. My last experience with amazon Aus was 5 years ago, but that was terrible (V. expensive shipping, and item arriving long after 'estimated' arrival time). Perhaps they have picked up their game now, but I know there are others like me with a negative experience that has discouraged future use of Amazon in Aus... Shipping costs may have been reduced too, but Im sure they are still much greater than other countries...
nl 15y ago
What you miss is that because Amazon is not in Australia, you have to pay a significant price for shipping and currency transfer to USD, then wait weeks (in my experience up to over a month!) for the thing to arrive http://www.bookdepository.co.uk/ http://www.bookdepository.co.uk/ Free (and pretty fast) shipping to Australia, better prices than Amazon, and a good catalogue (No association other than a happy customer).

vacri 15y ago

One thing to keep in mind when comparing cost of living: minimum wage. In the US, minimum waqe is about US$7.50. In Australia, it's about US$15. Your McValue meal is $1-2 cheaper in the US, but the minimum/low wage worker (the bulk of the workforce) has to work for less time to get that meal in Aus. Until the e-commerce boom of the last 5-10 years, this disparity wasn't much of a problem, as economies were much more localised. I'm not saying it's the complete answer (thankfully, I'm not an economist), but it's one of the most overlooked factors in all these analyses: the buying power of the poor.

deleted 15y ago
[deleted]
keeperofdakeys 15y ago
If you think about those who work in the food industry in the US, they depend on tips to get back the rest of that money. Unlike the US, you aren't obliged to tip in Australia.
- vacri 15y ago
  $7.50 is just the straight minimum wage, regardless of industry (varies from state to state). Hospitality workers in the US earn less than that (think I heard one say it was about $2.50). US Dept of Labour says federal min wage is $7.25: http://www.dol.gov/dol/topic/wages/minimumwage.htm http://www.dol.gov/dol/topic/wages/minimumwage.htm