Finance

The future of Australia Post will be off the beaten track

The Conversation /

 In the near future a trip to the Post Office in regional and remote Australia may mean picking up a parcel or a letter. It could also mean a virtual meeting with your tertiary education provider, a virtual consultation with a medical specialist or a discussion with an expert about how to leverage your local products into the Asian market.

Australia Post’s future, including its ownership and business model, has reached a tipping point at the centre of which is the decline in Australians’ use of the humble letter. Last week the government took privatisation off the table, removing a distraction from the bigger issues facing Australia Post.

Despite recent permission by the Australian Competition and Consumer Commission (ACCC) to increase the cost of postage from 60c to 70c per stamp, Australia Post still has to change its business model in response to the sharp decline in letters, or face rising losses.

Ultimately, changes to the obligations Australia Post must meet under Section 27 of the Australian Postal Corporation Act will be needed. Clause 1 in the Community Service Obligations (CSOs) section of this legislation states that “Australia Post shall supply a letter service”.

As a result, much of the focus in this debate to date has been directed at the importance and future of regular, affordable letter deliveries. Some, such as Monash economist Professor Stephen King argue the introduction of the NBN will make the current CSO on Australia Post obsolete. Others are determined to preserve the status quo.

Australia Post is different in the regions

This argument over letters is a distraction from what is really at stake. The services Australia Post provides to rural and remote communities cannot be neatly replaced by the National Broadband Network (NBN).

Australia Post provides a diverse range of services alongside letters that are vitally important for communication and trade. It is the only possible provider of these services in many regional areas.

And 60% of Australia Post’s 4,429 retail outlets operate in regional, rural and remote Australia. These outlets are often the hub of business activity in small towns.

Australia Post is also the only provider of parcel services in many areas, even though nationally this is a highly competitive market. As an agent for more than 750 businesses and government entities, Australia Post retail outlets provide access to services in areas where they are not likely to be replaced by private providers.

Any changes to existing CSOs will have implications for the broader network of outlets and services that Australia Post supports throughout rural and remote Australia.

The worldwide trend in demand for letter services suggests that the decline in the need for this service is terminal.

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