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Why the iron price boom means you pay more for an iPhone

  • September 16 2020
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Why the iron price boom means you pay more for an iPhone

By Cameron Micallef
September 16 2020

A strong Australian dollar spurred on by the high price of iron ore means Australians are now paying more for an iPhone relative to 12 months ago, new research has shown.

Why the iron boom means you pay more for an iPhone

Why the iron price boom means you pay more for an iPhone

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  • September 16 2020
  • Share

A strong Australian dollar spurred on by the high price of iron ore means Australians are now paying more for an iPhone relative to 12 months ago, new research has shown.

Why the iron boom means you pay more for an iPhone

The latest Commsec iPhone index explains that the appreciation of the Australian dollar compared with the US dollar has seen Aussies getting less value for money when purchasing a new phone, due to the price Apple charges remaining the same.

Commsec has questioned whether the Australian dollar has overshot its mark, with consumers ultimately losing out.

“The latest results add to concerns that the Aussie dollar is perhaps a little too firm at present, underpinned by the high price of iron ore,” Commsec said. 

While the high price of an Australian dollar might be bad for the latest tech junkies, the high price of iron ore is great for others, as miners, including Andrew ‘Twiggy’ Forrest, collect almost $2 billion in dividend payments, following record profits from his Fortescue Metals company.

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However, the miners’ strength have weakened Australians purchasing price parity with the appreciation of the Australian dollar seeing its cheap tech rating fall from 4th to 18th.

An iPhone 11, 64GB is $1,199 in Australia (US$875.18 at exchange rates sourced on 13 September). In the US, the same phone is US$699 (US$765.41 in Los Angeles with state and local taxes) – around 12.5 per cent cheaper. The price of an iPhone varies in US and Canada according to state and local taxes. 

In 2019, Australia ranked as the fourth cheapest place to buy an iPhone and the third cheapest country in the world to purchase an iPad.

“Last year the Aussie dollar was near US68-69¢ and today it is closer to US72-73¢. That has meant that Australia has slipped down the global leaderboard of US dollar pricing of the latest Apple devices,” CommSec chief economist Craig James said.

Like the Big Mac index, the CommSec iPad and CommSec iPhone indexes assume that the same goods should sell for the same price across the globe once exchange rates are taken into account, with the difference that consumers can pick up an iPhone in a cheaper country.

But if you assume that the Aussie price for an iPhone should be the same price as that paid by a resident in Los Angeles, then the exchange rate should be closer to US65¢. 

Again, if you assume that the Aussie price for an iPhone should be the same as China where the goods are manufactured, then the Aussie dollar is about 7.5 per cent overvalued.

Mr James said on current pricing, Aussie tourists would have saved approximately $150 by purchasing an iPad in the cheapest countries rather than in Australia.

“Unfortunately, it is a moot point given that Aussies can’t currently travel abroad and pick up bargains in the United States, Hong Kong, Japan or a number of other countries,” he said.

“The Australian dollar has appreciated by around 6 per cent against the US dollar over the past year. If our dollar hadn’t appreciated, Australia would have been the eighth cheapest place to buy an Apple iPhone in US dollar terms.”

For both iPhones and iPads, customers located in Latin America and Eastern Europe pay the highest prices in the world for the latest technology.

Why the iron price boom means you pay more for an iPhone
Why the iron boom means you pay more for an iPhone
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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