A number of OECD-wide average baskets have been constructed but they have limitations for comparing prices between a small number of countries. More sophisticated techniques have been advocated but have not been implemented. Comparisons can include or exclude the effects of indirect taxes, such as GST in New Zealand, or VAT in Europe. Normal practice is to compare prices net of these taxes, but some have opted to include them. The latter attempt to measure the internal purchasing power of individual currencies having regard to both traded and non-traded goods.
Normal practice is to use PPP rates, but actual rates can be appropriate in some circumstances.
In the graphs in this Appendix the price in a particular country of a selected basket of telecommunications services has been expressed as a percentage of the New Zealand price, after converting at the exchange rate selected for the comparison. The wide variations in the results presented here illustrate the problems that benchmarking must surmount. It should be noted that the benchmarking proposed by the Inquiry is of a different sort, taking place at the wholesale layer where services are much more in the nature of a homogenous commodity than retail services. The results of different combinations of baskets and exchange rates, for New Zealand and selected other countries, are presented below. In the interests of simplicity the graphs do not identify individual combinations, but instead present the overall pattern of results.