Price Disparities – Key Findings

  1. There are significant price differences for aids and equipment both within Australia and between Australia and overseas internet sources.  Internet prices, excluding transport costs, are generally lower than Australian retail prices.
  2. In some cases equipment can also be purchased overseas and transported to Australia with a delivered cost lower than the Australian price.
  3. Explanations for price differences between Australia and overseas include:
    • Australia is a high cost country – Purchasing Power Parity analysis shows that general price levels, expressed in Australian currency terms, are 20 per cent higher here than in relevant comparator countries.  The difference in relation to the United States is around 30 per cent.
    • For some equipment, Australian retail prices may reflect the cost of trained staff, pre-sales activity, trialling and repairs under warranty that do not apply to imported products.
    • Australia is a small market compared to the United States or the United Kingdom, so fixed costs must be recovered from a smaller customer base.
    • Disability aids and equipment are sold into ‘thin markets’, exacerbating the Australian cost disadvantage.
    • Setting up and operating an import business (as opposed to one-off internet buying) is expensive.
    • Internet retailing models are not well developed in Australia compared with other international markets.
    • Red tape issues such as retail trading hour regulations and burdensome development approvals raise retailing costs and discourage investment.
    • Meeting Australian Standards for aids and equipment, as well as TGA certification, can be expensive. 

Taken together, these factors can explain a significant portion of the difference between Australian and overseas prices.

  1. The investigation did not uncover significant market power problems in the pricing of disability aids and equipment:
    1. There are numerous international manufacturers of most types of disability aids and equipment.
    2. There are numerous wholesalers and retailers.
    3. There is no evidence that barriers to entry into most disability aids and equipment market segments lead to market power.

That said, some wholesalers or retailers may have a degree of market power for certain types of products or in some geographic locations, particularly in regional areas where multiple competitors cannot be sustained.

  1. Exclusive dealing and price discrimination do not appear to be the source of significant price disparities:
    • Some price discrimination occurs because consumers do not have adequate information or are unable or unwilling to incur search costs.
    • Price discrimination occurs within Australia and between Australia and other markets but is not necessarily illegal and is not a feature unique to disability aids and equipment.
    • Exclusive dealing is a common practice, but likely has an economic efficiency basis.
  2. Government procurement programs such as MASS are able to purchase equipment at a discount to retail prices.  Government program discounts reflect efficiencies from bulk buying.
  3. In terms of price impacts, the MASS program seems to be working reasonably well and received support from stakeholders. 
  4. Even so, a number of criticisms are made of the MASS program and other government programs.  There is scope to improve the efficiency and effectiveness of government programs for aids and equipment.
  5. The presence of government programs may affect the viability of domestic suppliers that do not participate and thereby reduce product variety and competition.
  6. The level of funding was frequently raised as a key concern for individuals with disabilities, their carers, therapists, NGOs and peak bodies.