IT Markups in Australia

Some articles in today's press moaning about IT product pricing in Australia and how we are being ripped off by unscrupulous global IT vendors like Apple and Adobe. A Federal parliamentarian is even called for another inquiry into IT pricing.

For mine, it's just calling for more money thrown into dodgy reports that will offer no real solutions. Save the 5 million and go back to basics.
The fact of the matter is every economist/financial analyst knows why it’s more expensive in Australia than the American markets (IT centric, but you can apply these rules to any industry)
1. Size of the market : Bigger market = more suppliers = more competition = reduced markups = lower prices
2. Lack of a domestic IT investment: Australia has basically no domestic IT market to counteract the offshore providers and so is in no position to influence prices with lower priced local competitors.
3. WACC – With interest rates high relative to the US, the average cost of capital in Australia is higher than in US (even in IT which is financed mainly through equity rather than debt). Hence business need to make higher returns to make economic profits (exceed the WACC of a company) in Australia. In a small market like ours, the only way to do that is to increase prices.

So there you go. The only way to bring prices down would be to invest in a domestic IT industry and/or reduce interest rates (can’t do much about the size of the market). Both of which are pretty much beyond the Government. So another inquiry will do nothing except throw some cash down the drain.