Fresh details revealed in the Australia Post inquiry by former chief executive Christine Holgate show the federal government has been considering privatising parcel deliveries at the taxpayer-owned postal service.
Holgate told the parliamentary inquiry on Wednesday that the federal government commissioned a confidential report in 2019, which recommended further privatisation of the postal service.
Holgate tabled part of the draft report by Boston Consulting Group (BCG), which states Australia Post could save $150 to $250 million in annual net profit after tax from its bottom line if the parcel service was privatised.
Graeme O’Brian, managing director of the Licenced Post Offices Group tells SmartCompany it’s unsurprising the government has been considering ways to cut costs within the postal service.
O’Brian, who worked at Australia Post for 50 years, including as head of parcel processing, says the potential that Australia Post would privatise its parcel services — in a similar move to the UK — became apparent when it acquired StarTrack.
“The idea of privatising Australia Post, in my view, started when Australia Post acquired StarTrack, which I think was then going to be the vehicle to sell off the parcel business,” he says.
According to O’Brien, selling the parcel service would firstly generate money for Australia Post through the sale of the parcel business, on top of any ongoing benefits resulting from reducing services.
“Of course, from a government perspective, if you sell parcels and get a stack of money, you would rightfully argue that it would reduce public debt,” he says.
The trade off, however, is that any privatisation of the parcel service would mean Australian individuals and businesses would then only be able to access services similar to those of existing parcel logistics companies.
“They don’t have the reach and breadth of Australia Post, and they will look to reduce services, where they don’t believe they can be profitable,” O’Brien says.
What’s more, is that big logistics companies compete for metropolitan trade — which results in less efficient services in rural and remote communities, he says.
Holgate’s submission to the inquiry states that BCG’s review did not support the position of Australia Post’s management in regard to growing its parcel delivery service, while building new services, such as financial ones.
“We believed this strategy would protect community services, maintain jobs and build a new legacy for Australia Post to serve all Australians for decades to come, whilst remaining viable,” Holgate said.
BCG argued that management’s strategy was “too optimistic and risky”.
Instead, BCG proposed a strategy of cutting costs and boosting efficiency by reducing letter services nationally, increasing prices, closing post offices, privatising the parcels business and restricting financial services.
O’Brien doesn’t dispute the fact that selling off the parcel service would increase profits for Australia Post. However, he does say that removing parcel services from licensed post offices around Australia would significantly affect their revenue.
“The loss of that trade really puts a big dint into post offices generally and would have an impact in rural and remote areas,” he says.
Despite the federal government commissioning the confidential review, a spokesperson for the Communications Minister Paul Fletcher said reductions in Australia Post services throughout the pandemic were temporary and would expire on June 30, The Guardian reports.
Minister Fletcher’s spokesperson said Australia Post would remain a government business enterprise.