Recent months have brought the emergence of one of the perennials of economic debate in Australia — the lament that Australia is a high-cost place to do business.
Last week Scottish economist James Mirrlees declared that Australian wages needed to be closer to Chinese levels, or the government would have to subsidise them, in order for Australia to compete for international investment with China. That came after one of the annual winter rituals in Canberra, “Minerals Week”, in which the men (and woman) who run our mining companies flock together to collectively insist that Australian workers need to be more “flexible” and cheaper — though no one said aloud what many of them probably think, that Gina Rinehart’s idea of $2 a day was an appropriate benchmark.
But that’s just wages. The complaint extends more broadly. In May, the World Bank declared Australia to be one of the most expensive economies in the G20, and in March, KPMG revealed Australia was now the second-most expensive place in the world to do business. Both pointed to the strong dollar and the resources boom, which has lifted our national income. So who’s to blame for Australia being so expensive?
The dollar
The Aussie dollar has defied everyone, from the current and former government to the Reserve Bank, and now the plunge in global iron ore prices, which should have dragged it lower.
Real estate
We all know residential property in Sydney and Melbourne is very expensive — so much so that foreign commentators routinely predict the bursting of the Australian property bubble. But high prices are because of one basic thing: people in Sydney and Melbourne like it like that.
Electricity
Electricity prices have rocketed over the last decade as that industry has taken advantage of the flawed rules around pricing regulation to bloat their maintenance budgets.
Food and groceries
Despite persistently low inflation since 2008 — except when natural disasters intervene — Sydney and Melbourne are also in the top 10 cities in the world for expensive food and groceries. While we buy a lot of overseas food that costs more because of transport and foreign exchange costs, we also have farm-gate access to some of the world’s most efficient food producers, who insist they are struggling.
Financial advice
According to the Reserve Bank, Australia has higher costs in superannuation than many other Organisation for Economic Co-operation and Development countries, and retail superannuation clients face “considerably higher” fees than elsewhere.
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