Thread: Inflation low - Except for woodworkers :)

I guess the only observation is that quality tools are a good investment . At least when compared to holding dollars! So we can all be happy that our spending on good hand tools has been a wise decision, not only from a mental health perspective, but from a financial one as well . Vindication!

Cheers, Dom

Bloody useless Aussie dollar probably has something to do with it. Retrospectascope is always 20/20 vision, but I wish I'd got more bits when the currency was stronger. Paid less for my UK Fe$tool router than they're fetching 2nd hand now :/

The other side is that many potential purchasers are holding off in the vain hope that the weak AUD may improve somewhat to lessen the pain.

Originally Posted by Bernmc

Bloody useless Aussie dollar probably has something to do with it. Retrospectascope is always 20/20 vision, but I wish I'd got more bits when the currency was stronger. Paid less for my UK Fe$tool router than they're fetching 2nd hand now :/

Yeah it is certainly a long way off the $1.10 peak and five or so years of parity. We also had a good run for tools from the UK when Brexit was announced and we had a period with lots of arbitrage opportunities. I suspect we won't see the Aussie strengthen again for a long time, if ever. And most other currencies will also be debased as well - leading to higher prices in currency terms everywhere. When the asset and currency inflation finds it's way into tangible goods.

Cheers, Dom

Originally Posted by Mobyturns

The other side is that many potential purchasers are holding off in the vain hope that the weak AUD may improve somewhat to lessen the pain.

Yeah, vain hope is right I suspect. I don't see the Aussie dollar strengthening much again. Blame the RBA, APRA, people who have been willing to borrow small fortunes to push up the price of housing (and inflate the money supply in the process) and also blame the lack of proper strategy and investment in the future during our boom years.

Cheers, Dom

Before Christmas I placed an order from an American Turning Tool Company. I had bought from them before and was happy with the product. By the time they added the weak $A as well as the freight my $US order was 35% over the American Catalogue price. I am not grizzling but just showing how we are at a disadvantage when buying off shore.

Just an aside.....my daughter and husband built a new house on a new block of land. The numbers were like telephone numbers which scared me. He has a very well paid job so everything was honky dory. His employer has announced that changes will be made around June this year which could find he no longer has a job. He decided to do some home work before the axe falls and got an Estate Agent to value the "new House" built in 2017. After they moved in they got a large slab laid at the back of the house and had it roofed in to form and alfresco shaded area. He also put up a large steel shed. The price from the Agent was less than what they had spent by around $10,000.

This news started me thinking about the cost of things in general. I have said for many years our hourly rate is too dear which pushes up the price of everything, so the price the Agent gave was (to my way of thinking) probably more in line as to the worth of the house and land which is not what is paid out to build it.

For my whole working career I have struggled in my mind what to charge (foreign orders or self employment) for work that I have done. I really never made much because I think I was too cheap. (probably soft in the business head too)
Maybe some one could show me where I went wrong

Originally Posted by chambezio

Before Christmas I placed an order from an American Turning Tool Company. I had bought from them before and was happy with the product. By the time they added the weak $A as well as the freight my $US order was 35% over the American Catalogue price. I am not grizzling but just showing how we are at a disadvantage when buying off shore.

Just an aside.....my daughter and husband built a new house on a new block of land. The numbers were like telephone numbers which scared me. He has a very well paid job so everything was honky dory. His employer has announced that changes will be made around June this year which could find he no longer has a job. He decided to do some home work before the axe falls and got an Estate Agent to value the "new House" built in 2017. After they moved in they got a large slab laid at the back of the house and had it roofed in to form and alfresco shaded area. He also put up a large steel shed. The price from the Agent was less than what they had spent by around $10,000.

This news started me thinking about the cost of things in general. I have said for many years our hourly rate is too dear which pushes up the price of everything, so the price the Agent gave was (to my way of thinking) probably more in line as to the worth of the house and land which is not what is paid out to build it.

For my whole working career I have struggled in my mind what to charge (foreign orders or self employment) for work that I have done. I really never made much because I think I was too cheap. (probably soft in the business head too)
Maybe some one could show me where I went wrong

To me your points are related. We are disadvantaged when buying things from overseas exactly because we are paid too much and because we have indebted ourselves too much. Both push up the amount of money in our economy, which, by definition, deflates the value of each dollar if the value of what we produce in this country grows slower than the growth in our money supply. The exchange rate falling is the result and a balancing mechanism to the deflating dollar. So things cost more from overseas. Or looking the other way, our dollar buys less - because each dollar is worth less. The Reserve bank and government keep trying to push our dollar lower telling us it's good for our economy - and it can be good temporarily to kick-start things - but it's also really bad if you have any savings in au dollars because this is effectively inflation that diminishes the value of those dollars - even if official statistics may not clearly indicate this.

Also, world-wide we are all paid too much and have too much. Considering we are consuming the planet at 3.5 times the sustainable rate, in reality, we should all be limited to about 30% of what we can currently 'afford' to consume or our money should buy on average 3.5 times less.

Cheers, Dom

Now you understand what the Governor of the Reserve Bank means when he says he wants to import inflation.

i'd say its probably a number of factors involved here. Obviously all this is not based on evidence but my opinion

- The baby boomer generation is at retirement age/retiring soon. Therefore pushing the demand for said tools.
- Govt small business tax writeoffs has seen a significant rise in those wanting to start their own business
- Alternate money making initiatives eg youtube, has seen a push of weekend warriors/hobbiest wanting to "show" their collection pushing demand for items that they may never have acquried.
- Gear acquisition syndrome (GAS) combined with social media can be attributed to above also
- Government policies pushing everyone into smaller homes means smaller workshops means more demand for hand tools.
- The number of manufacturers for hand tools has also reduced, eg in the past Stanley was a biger player in the market. Now not so much, so less competition to drive prices down.
- Higher end manufacturers forced to be cutting edge to maintain their position in the market eg instead of using HSS for blades they are now using cutting edge materials to stay in the game.
- The retail model is becoming a distributor model rather than maker seller model. So essentially the price of a product is dictated by how many hands have touched the product before it hits your shed. Taking into account standard trading margins that for a distributor is approx 30%, it doesn't take much to significantly increase the price of a product.
- Increasing disposable income, means increased ability to pay for products, similarly with the aging population comment. Australia in particular has seen a significant rise in average incomes. This provides vendors the ability to push the boundaries on pricing. This is can be seen in the mobile phone market, paying a few grand for a phone is almost normal, whereas in the past it would have been unheard of.

For offshore manufactured tools (Lie Nielsen, Veritas et al) the weak dollar is definitely to blame. Prices in the home market have not markedly increased in my observation.

Perversely, the weak dollar is likely to have contributed to increases in price for locally made premium hand tools. Our local makers have seen the opportunity of the North American market, and can offer their wares at similar price points to US makers in US dollars. This means that the AUD price rises - they have no need to keep prices down locally, as sales to North American customers is likely to way more than compensate for any local lost sales due to a price rise here. Of course they COULD keep prices lower and use the weak AUD to boost sales overseas, but that means a volume market play, and its hard to scale volume as a boutique maker of quality product. Better to maximise margin than maximise sales volume.

Originally Posted by RossM

For offshore manufactured tools (Lie Nielsen, Veritas et al) the weak dollar is definitely to blame. Prices in the home market have not markedly increased in my observation.

Perversely, the weak dollar is likely to have contributed to increases in price for locally made premium hand tools. Our local makers have seen the opportunity of the North American market, and can offer their wares at similar price points to US makers in US dollars. This means that the AUD price rises - they have no need to keep prices down locally, as sales to North American customers is likely to way more than compensate for any local lost sales due to a price rise here. Of course they COULD keep prices lower and use the weak AUD to boost sales overseas, but that means a volume market play, and its hard to scale volume as a boutique maker of quality product. Better to maximise margin than maximise sales volume.

Hi Ross, yes an astute observation on the locally made premium tools. Since some have started selling in the States the price has significantly increased.

I notice that the prices for the imported tools have been getting marked up to reflect our tanking exchange rate very recently too. A Lie Nielsen No.8 is now a couple of dollars short of $1000-. To me it shows that the value of our promises (money) is not what we thought it was. I'm not sure I see our exchange rate going North any time soon either with the state of our economy and the amount of stimulus money being created through fiscal policies and quantitative easing monetary policies of the Reserve Bank. Just ordered my last discretionary spend tool for a long long while I think.

Hope everyone is keeping isolated and well.

Cheers,

Dom

I agree that we are unlikely to see the pacific peso head north in any significant way in the near future. Our exchange rate did well during the GFC due to the relative strength of the Oz economy (allowing us to have much higher interest rates) against the US. That wont be the same this time.

I've just ordered a couple of Shapton waterstones to beat the next price rise.

Originally Posted by RossM

I agree that we are unlikely to see the pacific peso head north in any significant way in the near future. Our exchange rate did well during the GFC due to the relative strength of the Oz economy (allowing us to have much higher interest rates) against the US. That wont be the same this time.

I've just ordered a couple of Shapton waterstones to beat the next price rise.

Yes, and the fact that China went on a huge debt fuelled expansion, along with the US that drove up our major exports significantly and effectively bailed us out. Plus foreign demand for our dollars to buy up real estate and stakes in Aus businesses etc. All of which won't likely be occuring this time around. In fact we are likely to see quite the opposite in many major industries like education and tourism.

I just ordered a LN scrub - always wanted one, complete luxury, but what the hey. Was thinking of adding a No.3 but price shot up from $609 to $713 - I paid less for my No.8 not that long ago.

Here's to negative growth and inflation - stagflation.

Also glad i'm not tempted to buy a Badaxe hand saw now. You'd be looking at around $1000- landed now.