The Australian Competition and Consumer Commission will investigate Australia Post’s proposal to increase the costs of stamps for its basic mail delivery service from 70 cents to $1.
The proposal, which would see a two-tiered mail system introduced with slower delivery timetables on a basic postage rate of $1 per letter, is expected to become a reality by the January next year if approved by the federal government.
While the ACCC is not involved in approving the mail carrier’s proposed price increase, the regulator is required to assess the proposal against the Competition and Consumer Act and then tell Australia Post if it objects to the change.
The ACCC is currently calling for submissions from members of the public and will publish its findings by November.
As part of its review, the ACCC will look at how Australia Post shares its costs across its services, the mail provider’s forecasts for letter demand and review and if the slower delivery timetable will result in cost savings across the organisation.
ACCC chairman Rod Sims said in a statement under Australia Post’s proposal, a $1 basic postage rate will “significantly reduce the losses on Australia Post’s stamped letters by 2016-17”.
“Further, Australia Post’s monopoly letter services (stamped and bulk business mail) are forecast to reverse their previous loss making state by 2016-17,” Sims said.
“This would be a turnaround in a short period with the price increase.
“However, stamped letters would continue to face losses and there is uncertainty around the longer-term rate of decline in letter volumes and a risk Australia Post’s overall monopoly letter services could return to net losses.”
A spokesperson for Australia Post told SmartCompany this morning Australia Post lodged a draft notification with the ACCC in August to seek an increase in the basic postage rate (BPR) from 70 cents to $1 to “better reflect the cost of the regulated letters service”.
Australia Post had announced in March that it would seek to lift the BPR to $1 to apply to a new regular letters service for consumer mail.
At the time, Australia Post said while the planned BPR increase and service changes would reduce losses to do with mail volume, the changes would not be enough to return stamped mail to profit.
“The changes will keep post offices open – including Australia Post’s vital regional and rural network – keep posties delivering five days a week and ensure Australians everywhere can still access a world-class delivery service,” a spokesperson said at the time.
Get SmartCompany FREE to your inbox every weekday.
“Business and government customers will continue to receive volume incentives at the same level as they do now, relative to the full rate.”
“These changes are expected to be implemented in January 2016.”
Last month the Post Office Agents Association (POAAL) said the push for a two-speed letters service was met with a mixed reaction from the operators of licenced post offices.
POAAL director Bob Chizzoniti said in a statement it members’ payments are linked to the price of the postage stamp and when the price of postage goes up, those payments increase.
He said this includes payments for sorting mail and payments for PO Boxes.
“Our members can see that a price increase will give their businesses a short-term boost, but they are worried what the long-term effect on stamp sales might be,” he said.
Chizzoniti said licensees are concerned that the slower “regular” service might hasten the decline in letters volumes.
“The letter is a powerful promotional and marketing tool – study after study shows that the letter is far superior to email. Let’s hope that a slower, more expensive product won’t undermine the effectiveness of the letter,” he said at the time.
Chizzoniti said POAAL has long stated the letters service is in need of reform, but reform on its own isn’t enough.
He said Australia Post needs to find new income streams while reinforcing the value of the letter.
“We are disappointed that Australia Post has waited until losses in letters were so large before acting,” Chizzoniti says.
“POAAL had preliminary discussions with Australia Post some years ago to discuss possible reforms to the letters business, but Australia Post management had their fingers in their ears.”
SmartCompany contacted POOAL but did not get a response prior to publication.