Australia Post’s CEO Ahmed Fahour says the recently announced reforms of the letters service will help ensure the local Post Office remains a vital community hub.
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People living in rural and remote areas are going to be the long-term beneficiaries of the recently announced reforms of the letters service.
The reforms go a long way to ensuring the continued presence of Post Offices at the hub of communities, throughout Australia, for many years to come.
It will also mean that Australia Post can continue to provide last-mile delivery services to just about every address in the nation.
That’s especially important to people living in rural and remote Australia, who are all too-often forgotten by the large commercial operators that just don’t travel beyond the city limits.
While we understand that the changes to the letters service will be hard for some people to accept, they are absolutely vital to creating a sustainable future for Australia Post, with a presence in all Australian communities.
The alternative option – maintaining our letters regulations exactly as they have been for the past 25 years – is really not an option at all.
That would just lead to growing financial losses as the community’s use of letters continues to erode. The current combination of falling letter volumes, the world’s lowest stamp prices and heavy regulation would eventually overwhelm Australia Post.
We already know that Post is on track for its first full-year loss in more than 30 years. And, without these reforms of our letters service, the financial forecasts for our business are dire.
The root-cause of this financial problem is the community’s falling reliance on letters.
In the past six years, the amount of letters that our posties are delivering to the average household letterbox has already shrunk by one-third.
That’s the direct result of the rise of digital communications and electronic transactions. Email, text messaging, direct debits and social media have all proven to be very efficient, convenient and cheap alternatives to the traditional letter.
To compound this dilemma, we now know that the rate of decline of letters is accelerating. In the first six months of this year, for example, our letter volumes fell by 8.2%, compared to the same period in the previous year.
So it means that we are delivering a dwindling volume of letters to an ever-expanding network of addresses. That is the definition of unsustainable.
Our proposed approach to reforming the letters service is sensible, pragmatic and community-minded.
In practical terms, it means that we will introduce a new “Regular” letters service for non-urgent mail that will take an extra two days to deliver.
The introduction of this Regular service will enable us to gradually introduce operational efficiencies. So, in future years, we can reduce our costs in line with the community’s falling reliance on letters.
Customers who want their letters delivered to the current timetable will still be able to use the “Priority” letters service – but they will pay more for it.
Unfortunately, our postage prices must go up. The cost of continuing to offer the world’s cheapest postage would ultimately be an insolvent Australia Post. That would lead to us either cutting services or asking the Government for a hand-out. Nobody wants to see that.
We will protect the most vulnerable Australians from the impact of this price rise. The price of a concession stamp, available to 5.7 million Australians including the elderly, will be frozen at 60 cents. The price of stamps for Christmas cards will also be frozen at 65 cents. Together, concession and Christmas card mail accounts for almost half of all mail sent by consumers.
We are not expecting, or seeking, to earn profits on this community service. We merely want to reduce the losses – and, perhaps, break-even on the delivery of letters.
Our parcels and retail businesses operate in open, competitive markets. These businesses continue to be strong, innovative and profitable – despite all of the recent challenges we have faced in our regulated letters business.
So, with these reforms of the letters service in place, Australia Post (as a whole) can return to being a profitable, self-funding business.
That’s of importance to all Australians because it means we will have the capital and the resources to invest in – and maintain – our nationwide networks.
It’s also important to our business partners, such as Licensed Post Office (LPO) operators, who operate most of the small “mixed business” post offices located in rural Australia. The reforms will be of direct benefit to these locally-owned LPOs, because they will receive higher payments for the valuable work that they do in providing postal services in their local community.
These reforms will enable Australia Post to invest in new services too, such as trusted digital services and enhanced parcel delivery to support the growth of online shopping.
With these reforms in place, we can carefully reduce the size of our letters operations as the community’s use of the service declines, while also investing in the services that will enable us to connect and serve Australians into the future.
Ultimately, these changes will free-up Australia Post to be part of tomorrow.
