iPod Index Says Australian Dollar Overvalued against Greenback

Posted on September 20, 2010

Commsec's iPod index shows the Australian dollar is overvalued against the US greenback, which means that Apple iPods are just as expensive now as they were two years ago. It also means that retailers better take heed and reduce iPod pricing or consumers will buy over the Internet from overseas sellers.

According to the CommSec iPod index, which tracks the price of the media player around the globe, the Australian dollar, Euro, Swiss franc and British pound are all overvalued against the US dollar. There are 18 other countries where you can buy an iPod nano cheaper than Australia, compared with only 14 countries six months earlier.

Local iPod pricing hasn't changed in almost two years, despite a near 40 per cent increase in the value of our currency, Commsec chief economist Craig James says. That means if local retailers are too slow to update the prices of their imported goods to match currency movements, they risk their customers turning to the internet to buy from overseas.

"If the Aussie dollar remains firm and local prices don't become cheaper, then more Aussies will be getting online to make their purchases or buy goods on holidays, putting pressure on local retailers," James says. The CommSec iPod index is a modern-day variation of the long-running Big Mac hamburger index compiled by The Economist magazine.

Both indexes work on the theory of "Same Goods, Same Price". Ideally, the same product should trade at the same price across the globe if exchange rates are adjusted properly.

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