Cheapest and safest way to mail a 1kg parcel to USA?

I recently bought a handbag through www.modnique.com and was sent a faulty item. After I lodged a complaint to the Co,I was requested to return the item on the proviso that they will refund a limit of $20 for the postage. Australia Post had told me the cheapest cost is $37 including packaging by registered post. I am unhappy to pay for part of the return fee and requested Modnique compensate me for the full amount instead but they had replied to my request with a cheeky offer of $30 store credit by keeping the bag. I am really frustrated after numerous emails about this because of two reasons. Firstly the item is still brand new and unused with a manufacturer fault. I had threaten the co that I will go to the consumer affairs if this matter is not resolved amicably but the Co is still insisting on their return postage policy citing the Co has slim profit Margin causing them unable to rebate more than $20. I believe any respectable online store would think it is reasonable to offer a full refund including the return cost for something faulty that is not the customer's own doing. Now all I want is to get my money back and close my account with Modnique.com.