Microsoft blames Australia for higher prices

Microsoft blames Australia for higher prices

Summary: Microsoft has placed the blame for IT prices being higher in Australia squarely on stronger regulation and higher labour costs.

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Microsoft Australia has defended the so-called "Australia tax" on IT hardware and software, stating that Australia has stronger regulation and higher labour costs than many other countries across the globe.

The defence came in Microsoft's submission to the parliamentary inquiry into high Australian IT prices, which was launched by Labor MP Ed Husic.

Microsoft said it recommends retail pricing to the channel partners that it sells products through in Australia, but that it does not set the final price that the customer pays. Microsoft argued that prices will therefore vary depending on the size of the market, which in turn affects supply and demand. In addition to this, Australia has other costs, according to Microsoft.

"There are a range of additional factors that impact pricing in the Australian market, including the relatively high cost of labour and rent; the impact of Australian-specific regulations; the higher costs of marketing, training and advertising; supply chain costs, including transport, distribution and exchange rates," Microsoft said in its submission.

The tech giant noted that while software delivered online, such as the company's Office 365 product, does allow for a reduction in the costs for vendors, "the costs for providing services — including establishing, maintaining, supporting and advertising services — needs to be recovered".

The company also said that a like-for-like comparison of prices between the United States and Australia is often disingenuous, because Australian prices are quoted with GST included, while US prices leave off sales tax until the point of sale.

The Australian Industry Group's (AIG) submission largely agreed with Microsoft's stance, stating that warranty requirements within Australian law, and distribution costs, wages, rent, insurance and government taxes all add up to higher costs for retailers doing business in Australia. The group estimated that Australian businesses spend around 4 per cent of annual expenditure on complying with government regulation.

Australia's distance from the rest of the world is also a major factor affecting prices.

"The small, geographically disparate nature of the Australian market affects costs such as providing after-sales service and product maintenance and servicing," the group said.

The AIG recommends that the government remove "unnecessary regulation", and revise any regulation that places a burden on businesses. One such recommendation is to encourage regional spectrum harmonisation in the 700MHz spectrum band, to ensure that equipment produced for that spectrum band — most likely for long-term evolution (LTE) "4G" devices — could be mass produced, and reduce the cost for suppliers and — ultimately — consumers.

Microsoft was one of only half a dozen publicly published submissions by technology companies to the inquiry. The committee has so far published 69 submissions, with an additional three marked as being confidential.

Submissions are now closed. It is expected that there will be a number of public and private hearings for the inquiry. Apple has reportedly arranged a private meeting with the committee today; however, the company had not confirmed this to ZDNet Australia at the time of writing.

Topics: Government, Government AU, Microsoft

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Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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13 comments
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  • Microsoft is wrong!

    What a joke, I work in retail in both selling and repairing PC's and laptops. I also order most of our it stock and I can tell you now, that over the last 4 years while our Aussie dollar has gone through the roof our buy prices from our supply has not changed at for software and not changed much for our hardware.
    We are being ripped off!
    martin_js
    • Source offshore

      No point fighting it, costs much cheaper out of Asia or US direct.
      Richard Flude
    • Free money from foreigners!

      I see that the average salary in Australia is the 5th highest in the world... higher than Canada, higher than the UK, and a lot higher than France or Germany. You can't expect people around the world to shoulder the burden of your salary levels.
      Robert Hahn
      • Inflated Prices

        You are correct only to a degree Robert.

        I buy online, usually direct from the USA and download my software purchases. The same inflated prices apply to these direct downloads from the USA. Our salary levels should have no impact at all on these types of purchases.

        BTW, IMHO Adobe is even worse than Microsoft. For direct downloads, they charge me about 40% more than the USA prices.

        Regards
        dgprice
      • That doesn't explain no Price shifting

        From our suppler. No change at all in some cases. When our dollar was at 70cent to $1 American and now it's $1.03 to $1 American. Some one in the food change is pocketing that shift. Nothing to do with high wages.

        The trouble with the high wage argument is it ignores the high cost of everything else. Last I heard we had one of the most expensive property costs in the world.
        martin_js
  • Just how much are the local costs?

    Office Professional is US$349 in the States, $499 here (42% more). Assuming parity on the dollar, even if 50 percent of the cost of the product was based on local cost, and the Aussie costs are 25% higher, it would still work out at less than $400.
    phildobbie
  • ripped off!

    Our average salary has been skewed by the overtime we have to do to afford to live in Sydney. The reason the cost of living is so high here is because the people who buy are willing to pay well over market value, which they then complain about. Utility prices start going up, because there's too much burden on the infrastructure & not enough maintenance has been done in the last 20 years (or more).

    Our dollar should mean the prices are equivalent to the US, as we can use exactly the same software with no modification. Shipping doesn't add 50% to the cost, despite what Micro$oft is claiming. I know, I've worked in the transport industry most of my life.

    Therefore, the public at large refuse to pay more than 2.8% markup on hardware, which has high costs, yet will happily pay a 100-150% markup for software?

    Yes, M$ is ripping people off, but they're also ripping themselves off with their stupidity.
    cjc82a
    • Error

      "people who buy are willing to pay well over market value"

      SYS00168: Statement contradicts itself.
      Robert Hahn
  • You can make back in one purchase

    The cost of setting up a USA address and then use that as a billing address for one of your credit cards. Amazon, Apple, Google, Microsoft, works for all.
    meski.oz
  • Microsoft's Excuse on Pricing

    Like the very first comment, what a joke. Australia has always been treated like some rich cousin to USA and the rest of the world, we aren't rich at all. The one thing I would like is to have all digital downloads of software to MATCH the USA. They say there is tax etc but when you think about it, if it's below the amount that the gov sets then there is no tax. Microsoft TechNet digital version is almost or is over double the price of the USA and it's the same method of delivery that is set for the rest of the world.

    If there is one thing I WANT is to have all digital downloads set the same price as USA, that way if the dollar is weak or strong then we get it at the correct price. This shoudl be across the board for all software makers no matter what part of IT (or games for that matter) they are in. This subject makes me kind of angry too
    bsguru
  • Mr Q

    Interesting. Last year I queried the extreme difference between Technet Professional in Australia and the US, and this was the reply from Microsoft regarding it:

    Below is the official statement by Technet Business Group - Australia regarding difference in pricing:

    "Microsoft's general strategy is to charge similar customers similar prices worldwide when buying licenses for the same software. Many of the programs we sell are worldwide in nature and it would be ideal if international currency exchange rates never varied - but they do, and constantly. There will be a difference if the Foreign Exchange Spot Rate is different from the rate that Microsoft applied when it established its current Price List in a local currency. Long term price stability is a key principle by which we operate. Generally we believe this is the best approach for the majority of our customers and partners."

    This doesn't seem to match up very well with the "Australia Tax" they're charging. Though the price differential certainly did.
    Mr_Q_
  • Supply and Demand

    An organization wanted Microsoft Exchange for email. When they looked at the cost, they chose to follow a suggestion to use an open source alternative. Apart from a small sacrifice in compatibility with MS Outlook, it worked fine until they eventually moved to Google. There is no reason in most cases to have to pay these prices.
    ksarkies
  • Wait, what?

    So what the US vendors are saying is, because Australia is isolated, rich and expensive, we should pay more for their products? Let's break that down, shall we?

    Isolation: Fair enough, if you are physically transporting something from one country to another. But for digital media as well? What is thousands of kilometres at the speed of light?

    Rich: We managed to get along while the rest of the world had its finances put through the wringer. That is well-managed, not rich. The majority of us are barely able to get by (I'll get to that next), and to give Australian users the finger who need the software for one reason or another (open source is great, but the world is mostly Windows-centric, and the switch is difficult for the unprepared or unknowing) is an insult.

    Expensive: Unfortunately this is 100% correct. Both for employers and employees alike. When our "she'll be right" attitude no longer held sway against crumbling infrastructure, our country tried to do too much too fast, and introduced things like the Carbon Tax to (presumably) invest in the cost of repairing this infrastructure (our politicians would be fools indeed if they were doing otherwise (which is almost guaranteed to be happening)). In any case, these costs must go somewhere, and unfortunately hits our wallets the hardest. But again, if you are distributing from overseas, performing transactions online, and even using the Internet as your distribution medium... where does the mark-up (in instances of 25-40%) come from?

    To sum it up: Australians aren't all gullible and foolish. We're certainly not rich. We know what's fair and this unfounded Australia Tax most certainly is not.
    dmh_paul