Diana Clement: Why do we put up with these rip-offs?

4:00 AM Saturday Jul 24, 2010

Rip-offs in New Zealand are big news, following an opinion piece in this newspaper by UK sports writer Peter Bills.

It's an issue that anyone who keeps an eye on their personal finances ought to be thinking about. We do get soundly ripped off in a large number of areas.

I first wrote for the Herald about rip-offs in 2005 - a year after returning from my OE. I was astounded that Kiwis simply sat back and accepted patent wallet-gouging rip-offs.

At that time, Google returned 11,000 entries for the words "Rip Off Britain". Today it's 58,900.

Of my "dirty dozen" rip-offs in New Zealand in 2005, at least nine still stand. That includes bank fees, fund charges, share dealing, books and magazines, consumer imports and domain names. All of these cost much more here than overseas. For example:

* We're told books are expensive here because of the shipping charges. But the chances are that expensive UK-published book you bought was printed in China, not the UK.

* Real estate agent fees still befuddle me. How can agents charge 4 per cent to sell a property here, when people pay as little as 1.5 per cent in the UK?

I'm pleased to say mobile phone calling rates have become slightly less torturous here than they were in 2005 when I compared Vodafone's charges to UK customers with its New Zealand charges.

Today the costs of calls on Vodafone UK's Simply call plan aren't hugely different from Vodafone New Zealand's Simply pre-pay. But this is just a simple comparison.

In 2005, it was also many times more expensive to get a credit report here than in the UK, where I had been living. It's now free in New Zealand, which is good news.

Another improvement is that KiwiSaver has helped improve competitiveness of charges on superannuation, at least, which has to be a good thing. Growth of some superannuation funds was being eaten up by charges, which I pointed out at the time were as low as 1 per cent in the UK.

Managed funds are still fee-laden in this country. The argument goes that if the fund is a good performer then the fees don't matter. But the majority of funds aren't, and the fees eat into the growth.

A quick search on Fundsource.co.nz and Trustnet.com to compare high-flying global funds in New Zealand and the UK found the annual fees of AMP's International Shares Trust and M&G's Global Basics fund, both of which have performed well in the past year, were only 0.15 per cent apart, but the New Zealand product had a 5 per cent exit fee and the UK one none.

It's not surprising that some investors choose to go direct to overseas fund providers - although that excludes them from favourable PIE tax rates and also makes accounting for the Inland Revenue Department's foreign investment fund rules more difficult.

My 2005 article made some readers foam at the mouth. How dare I criticise New Zealand? But journalists aren't cheerleaders and the article led to readers bringing many more perceived rip-offs to my attention.

Vets' and dentists' charges are two that are regularly cited as financially gouging - or even being cartels. And GST on rates is a tax on tax, readers pointed out.

Dentistry: The cost of dentistry in New Zealand is appalling. Over the years I've had emails and blog postings from a number of readers, such as Andrew, who had been quoted $25,000 for some major work on his teeth, but had the work done in Thailand and got a holiday thrown in for less than $5000.

The arguments against going to Thailand, Bali or India for your dental treatment are along the lines of: would you have dental work done in a country where you wouldn't drink the water? And what about follow-up?

I spoke to Ian Roy, director of Medical Services Thailand Ltd, whose business lines up top-class medical treatment and dentistry for Kiwis.

Roy says the medical facilities he works with are large private hospitals and the doctors and dentists are often trained in the UK or United States.

"As a ball-park figure, you pay 70 per cent less in Thailand than what you pay in New Zealand," he says.

European: It's such a cultural cringe, but anything with the word "European" added to it comes with a premium price in New Zealand. Never mind that it might be designed in Europe, but made in China. The tag "European" just encourages me to buy Kiwi-made.

A classic for me is Zanussi appliances. When I lived in the UK, these were viewed by my local friends as cheap and nasty. Here they have the "European" marketing with the associated premium price.

A reader commenting on one of my blogs this week said that when the seatbelt buckle failed on his European Volvo, the local dealer offered to source one from Sweden for $1000.

"We are talking about a seatbelt buckle that bolts to the floor, not a new car interior," he said - and opted to have a UK dealer supply an entire Volvo seatbelt for the equivalent of $165 including shipping.

This came just a few months after a friend had to pay $900 to replace the tyre on her Volvo.

"The tyre shop said it was expensive because it is European," she told me. "We were definitely fleeced."

Groceries/shopping: Many of those commenting on Bills' article cited prices here as being as much or greater than they'd paid in Rip Off Britain, where they'd either done their OE or emigrated from.

One reader said: "Of course all those New Zealand businesses will have a litany of excuses for why they are charging so much, but the truth is New Zealanders are greedy, grasping little pigs."

Another had recently compared a trolley full of groceries by using the online shopping website of a UK supermarket and found he was paying 40 per cent more here.

There has to be something wrong when you can order individual items from the US or UK online and have them delivered for less than the standard New Zealand price.

A case in point was a DVD of The Parent Trap I bought my children last Christmas. The cheapest online price I could find at the time in New Zealand was $37, plus postage. Instead I ordered it from the UK's Sendit.com for $17 including postage - and it arrived just four days later.

While I can compare with the UK because of personal experience, other readers cited examples from other countries. New Zealand meat and fish is cheaper in Oman, the United States and Japan, I'm told, even though it has been shipped halfway around the world.

Car hire fees: This probably doesn't affect many readers, but one interviewee this week, for another article, got right off topic when he heard I was writing about rip-offs.

He'd taken a $59.95 deal from Hertz, but was charged an extra fee for pick-up and drop off from Christchurch airport - even though the company had cars there anyway. What he thought would cost $180 for three days ended up being $340 with all the extras loaded in. Likewise, one of Bills' readers complained he needed to pay a $150 "Queenstown fee" even though he was picking it up and dropping it off at the same place.

Economies of scale will enable cheaper pricing on a wide range of goods and services in other countries. Lack of competition is another problem here, as is a shortage of questioning by the public. The answer is, whenever there is a rip-off, vote with your feet. It's easy.

There were 300 comments and counting about Bills' article on Wednesday when I finished writing this. They can be viewed at tinyurl.com/2fl24mx.

Few related to financial services. But money is money and every $20 saved on a DVD, night out, or stay in a hotel adds up to a lot of retirement savings foregone.