3.1
This chapter considers the future of Australia Post’s service delivery, including:
possible long term impacts of COVID-19 on the postal sector;
the temporary nature of the regulatory changes;
options for safeguarding the future sustainability of Australia Post;
the future for licenced post offices (LPOs); and
servicing the needs of rural and regional Australia.
Possible long term impacts of COVID-19
3.2
There is evidence that the COVID-19 pandemic will leave lasting impacts on economic and social conditions around the world for years to come. This will obviously have flow on effects for postal delivery services both in Australia and globally. Australia Post submitted that research is predicting an ‘irreversible’ fall in the demand for letter delivery, ‘as customers depend more and more on digital solutions for communicating with each other’.
3.3
Australia Post reported that a number of countries have relaxed their service obligations as a response to the pandemic and its effects, including Belgium, Canada, Switzerland, Spain, France, Hungary, Ireland, Italy, New Zealand and the United Kingdom. Despite relaxing service obligations, postal organisations in many countries are forecasting losses for 2020-21. The worst affected include those in Italy, New Zealand, and the United Kingdom, which were impacted by lockdown measures.
3.4
The border closures and travel restrictions in place around the world have led to significant reductions in the volume of international post. Managing Director and Group Chief Executive Officer, Ms Christine Holgate, said Australia Post ‘had a growing international business that collapsed by almost 90 per cent in the very early part [of the pandemic], as borders closed across the country’.
3.5
While letters and international post fell, parcels grew. Australia Post submitted that it expects demand for parcels to continue growing, ‘through the pandemic and beyond’. Its shareholder departments were more circumspect.
3.6
The Department of Infrastructure, Transport, Regional Development and Communications (the Communications Department) is responsible for ‘broader postal policy issues’, Australia Post’s regulatory obligations, and ‘the performance, financial returns and strategic direction of the business’. It administers these responsibilities with the Department of Finance.
3.7
The Communications Department said the future that will emerge from COVID-19 is not yet clear:
The ongoing and future financial impact of this unprecedented pandemic cannot be determined definitively at this time… Initial analysis indicates that the accelerated decline in letter volume during COVID-19, and consequential increased letters loss has been offset by the boom in parcels. However there is considerable uncertainty about how long the boom in parcels will be sustained for.
3.8
Retailers, on the other hand, seem confident that the shift to online purchasing will be permanent. The National Retail Association submitted that retailers across Australia have ‘invested in new infrastructure to support the changing purchasing habits of Australians’.
The temporary nature of the regulatory changes
3.9
The Australian Postal Corporation (Performance Standards) Amendment Regulations 2020 are set to expire by 30 June 2021. However, a number of submitters argued that the changes to letter delivery frequency represent changes that Australia Post wants to make permanently, rather than on a temporary basis.
3.10
Mr Shane Murphy, National President of the Communications Electrical and Plumbing Union (CEPU, also known as the Communications Workers Union or CWU), argued that it was disingenuous for Australia Post to maintain that it intended the changes to be temporary:
…the fiction Australia Post and the government maintain that these measures are temporary is just crafty spin. At every opportunity, Australia Post seeks to portray the changes as temporary. You will find that the words appear some 55 times in the 59 pages of their submission. In contrast, I draw the committee to page 7 of the Australia Post written submission, where they state: If we are unable to maintain the temporary regulatory relief, our options to remain sustainable as a business are limited. Therein lies the admission that you are not making a decision on temporary change with these regulations.
3.11
The Community and Public Sector Union was also concerned that the changes were not intended to be temporary. Ms Brooke Muscat-Bentley, Deputy National President, said, ‘I think the committee needs to be very clear: the Senate is making a decision for the future’.
3.12
National President of the Australian Manufacturing Workers Union (AMWU), Mr Andrew Dettmer, stated that he believed the regulations represented a move by the government to bring in ‘far-reaching’ permanent changes, ‘under the guise of COVID-19’, and avoiding scrutiny. The AMWU was especially concerned with the removal of the priority mail service, which it believes is ‘not a temporary change and will continue on’ post-COVID.
3.13
Asked to confirm if the regulatory changes are intended to be temporary, Ms Holgate said ‘yes’, but commented that, while the regulations are currently set to end on 30 June 2021, ‘this health crisis is far from over, as a country we now have to prepare ourselves for stage 2, which is the economic challenge facing us’. Ms Holgate referred to further lockdowns, travel bans, and additional health challenges which could require Australia Post to step up its delivery of parcels even more. Australia Post also submitted that it does ‘not foresee letter volumes returning to pre-pandemic levels’.
3.14
In response to questioning about the Community Service Obligations (CSOs), Ms Holgate said that, despite the losses incurred by Australia Post as a result of the CSOs (over $400 million in the last financial year), the changes are temporary, and Australia Post has received ‘evidence’ from the departments about how it would ‘return [its] workforce back to being able to deliver those standards’.
3.15
Ms Holgate was asked about a letter Australia Post sent to its shareholder departments requesting regulatory relief. The question went to the nature of the relief sought and whether it was temporary or permanent. Ms Holgate replied that she had ‘asked for support’, laying out ‘a number of different options’. General Counsel and Company Secretary, Mr Nick Macdonald, added that ‘a variety of things were requested’, with some being temporary and others ‘not expressed to be temporary’:
Ultimately, what happened was that further discussions took place with our shareholder departments, which led to a refining of that request and the amendments to the regulations that were ultimately made. Those amendments are clearly temporary. We acknowledge that and understand that those regulations will be subject to review on an ongoing basis and in the lead-up to their expiry. What happens with those regulations beyond their expiry is a matter for the government and for further consideration, and, as I understand it, that process would involve extensive consultation.
3.16
Australia Post submitted that maintaining the temporary regulatory changes for ‘the full period—until at least the end of financial year 2020-21—is ‘critical’. Further, that in the lead up to the end of June 2021, Australia Post will:
…see what the post-pandemic future will be–both in relation to our services and in the broader economic sense–and to refine our considerations of what will then be the best service arrangements to meet our customers’ expectations.
3.17
The Department of Finance (Finance) submitted that shareholder ministers ‘expect to receive regular reports on the effectiveness of the regulatory relief measures, and are expected to review the arrangements after the first six months of operation’.
3.18
The Communications Department outlined the criteria for reviewing the regulatory changes at the end of 2020, saying:
The assessment will include consideration of:
letter and parcel volumes and delivery speeds, including whether Australia Post has met its prescribed performance standards under the relief
community and business feedback to determine whether Australia Post is meeting the needs of the community and businesses during the COVID-19 pandemic
the impact on the Australia Post workforce; and
other dependencies, such as developments in the aviation sector.
3.19
Australia Post is closely watching what will emerge from the coronavirus pandemic, and has said:
Determining the role which Australia Post will play in supporting Australians in coming years will be influenced by the manner in which the emerging social and economic trends develop over the next nine months. It is only through careful consideration of the permanent versus temporal nature of these trends and broad consultation with a range of stakeholders that Australia Post can establish the specific direction required.
3.20
The Communications Department also acknowledged the possibility of future regulatory changes, saying any such changes would be developed in consultation with stakeholders, and subject to parliamentary scrutiny and disallowance.
Safeguarding the future sustainability of Australia Post
3.21
With letter volumes steadily declining, submitters made a number of suggestions aimed at securing the future of Australia Post and the post office network. Many submitters argued that more permanent changes to the CSOs are inevitable and would be beneficial. A number of submitters proposed regulation for parcel delivery services. Other ideas raised included increasing the services post offices can provide, including banking services and additional government services.
Long term regulatory reform
3.22
Evidence to the inquiry demonstrated that COVID-19 has accelerated an existing trend of declining letter volumes. According to the Communications Department, even before COVID-19, the number of letters Australian households receive was expected to drop from an average of two letters per day in 2007-08, to two letters per week by 2021-22.
3.23
Associate Professor Paul Alexander from Curtin University submitted that the delivery costs for a $1.10 letter are largely the same as for a $10 parcel, making parcel delivery significantly more profitable. In this context, Ms Holgate confirmed that 49 per cent of Australia Post’s costs are associated with letter delivery, but letters account for only ‘20-something per cent’ of its revenue.
3.24
Professor Alexander said policy makers needed to think long term, and address the question of:
…whether the social good is best served by keeping Australia Post to its historical obligations, or allowing it to meet burgeoning parcel demand and return a bigger dividend to the federal government to help fund other public services. While opinions will vary, the numbers make a compelling case. They show a mail delivery system designed before the advent of the internet doesn’t need to be daily any more – just as the telephone last century helped end the importance of mail being delivered twice a day.
3.25
Ms Kelly Eckel from the Woodbridge LPO in southern Tasmania submitted a similar view:
Australia Post is building tomorrow’s jobs for today’s workforce. We’ve needed to get smarter to stay ahead of the competition so by changing the way we deliver from Letters to Parcels just makes sense! I fully support these regulatory reform changes in order to secure our future in Australia.
3.26
New rules applying to companies from 6 May 2020 remove the requirement for communications with stakeholders to be undertaken via written letters. These changes will, Australia Post suggested, further ‘accelerate letter volume decline’.
3.27
The Licenced Post Office Group (LPOGroup) submitted that its members see the decline in letters and prominence of parcels every day in their post offices. LPOGroup observed a ‘disconnect’ between the legislated standards and the ‘changed environment’ in which Australia Post is operating and recommended that:
…all elements of Section 28C of the Act [which sets out the performance standards to be met by Australia Post] should be reviewed in the interim to determine whether they are still appropriate in the current and future environment, with particular regard to the frequency of letter delivery, and provision of retail outlets.
3.28
Finance submitted that postal services in other countries have already permanently reformed their letter delivery frequency:
In recent years, several of Australia Post's global peers have reformed their letter delivery frequency and speed, as part of broader postal service reforms, to deliver significant reductions in cost whilst continuing to meet community expectations. New Zealand, Italy, Finland, Netherlands, Denmark and Norway have all enacted reforms which have reduced delivery frequency and speed to reflect evolving community needs and expectations.
3.29
Mr Richard Windeyer, Deputy Secretary of the Communications Department, confirmed that the department is ‘alive to and thinking about the future of Australia Post’. Mr Windeyer said that if the department reached the point where it was:
…considering whether, as you suggest, these current changes should possibly be able to go longer, or an alternative set of changes to the regulatory framework, yes, that would be done in consultation and consideration of a whole range of issues, including the users of the letter service. It would also be done, to be honest, taking into account the users of a full range of Australia Post services, not just the letter services but all the people that use services at postal outlets, for example, and people that rely on their delivery services for parcels.
3.30
Mr Windeyer also confirmed that future reforms would likely involve changes to the primary legislation.
3.31
The CEPU cautioned that the Parliament should be ‘on guard’ against any attempt to move towards privatisation of Australia Post, which could be facilitated through first reducing its legislated service obligations. Mr Murphy said that basic public services such as the postal service, ‘our national supply and logistics backbone, are needed now more than ever’.
3.32
Asked about the issue of privatisation, Ms Holgate said that she had never ‘discussed privatising Australia Post’, that it was not her ‘strategy to do so’, and that it was not a position supported by Australia Post’s shareholder ministers or departments.
Recent reviews
3.33
In 2017, the Australian National Audit Office (ANAO) undertook an audit into Australia Post’s delivery of reserved letter services. As part of its findings, the ANAO recommended that the departments of Finance and Communications ‘review the policy framework relating to Australia Post’s Community Service Obligations in the context of the Australian Government’s broader commitment to providing access to communications infrastructure’. In responding to the recommendations, the departments ‘did not state’ whether they agreed or disagreed with the recommendation.
3.34
The ANAO observed that ‘developing and testing proposals for more fundamental reforms of Australia Post’s business model’, and ‘generating stakeholder support’ for any permanent changes to the CSOs, would likely take a number of years.
3.35
Since the ANAO’s report was published, two strategic reviews into options for the future of Australia Post have been completed:
the 2018 Australia Post Strategic Review by PricewaterhouseCoopers, which was commissioned by and for the Australia Post Board, and provided to shareholder departments in May 2018; and
the Review of Australia Post by the Boston Consulting Group, commissioned by the government in November 2019 and received 21 February 2020.
3.36
While Australia Post did not provide the PricewaterhouseCoopers report to the committee, it confirmed that the report had ‘identified a number of strategic options for consideration in the interests of preserving Australia Post’s financial sustainability’. According to Australia Post, some of the options canvassed were:
seeking a temporary government subsidy for meeting the Community Service Obligations in rural, regional and remote areas;
simplifying and modernising the regulatory framework, including the CSOs; and
increasing delivery times for regular letters by three days.
3.37
The government commissioned the Boston Consulting Group to review Australia Post’s strategy to operate as a ‘sustainable and fit-for-purpose service provider for the longer term’, and to ‘consider broader market conditions such as growth in e‑commerce, the regulatory environment, and changes in business and consumer needs’.
3.38
Ms Holgate stated that the Boston Consulting Group review incorporated five recommendations, or options for reform, one of which involved reducing the number of post offices.
Regulating parcel delivery
3.39
The Communications Department noted that, unlike letter delivery, Australia Post does not have ‘a legislated monopoly’ over delivering parcels, and there are no parcel delivery standards or regulations.
3.40
A number of submitters, including the Australian Small Business and Family Enterprise Ombudsman (Small Business Ombudsman), argued that parcel delivery standards should be included in the Australian Postal Corporation Act 1989. The CEPU recommended ‘a basic regulated parcel service: a transformed universal service obligation’.
3.41
Mr Murphy expanded on the union’s support for the idea:
The unions absolutely support it and think the committee should be forward thinking and looking at forward regulation in relation to a similar, but not exactly the same, regulation that we have on letters—a regulation in relation to a USO for parcels to be provided to 98 per cent of Australia, similar to that for letters. We understand parcels is a competitive environment, so there needs to be some significant work and consideration given to how we can continue to maintain the competitiveness for farmers living in and people living in, working in and running businesses in rural and regional Australia… But we think it's important that this committee look forward, as parcels are the new letters, if you like. As the way forward, they should be regulated in some way, and they certainly should be regulated for equality for people living across rural and regional Australia—in particular, for farmers, small businesses and people in those areas.
3.42
Asked about the idea of regulating parcel services, Ms Holgate replied that ‘the parcels business is a highly competitive market’. Neither of the departments addressed the idea in its submission or in detail at the hearing.
Other ideas
3.43
In a discussion paper prepared for the CEPU in July 2020, PerCapita proposed the government consider establishing ‘a public bank’ by providing Australia Post with an Authorised Deposit-taking Institution licence. PerCapita said government could leverage the ‘existing infrastructure footprint of Australia Post outlets nation-wide’ to provide banking services to those who are underserviced by banks, such as those in rural and remote areas.
3.44
The Small Business Ombudsman recommended Australia Post renegotiate its Universal Postal Union agreement terms, or impose a fee on incoming international parcels, ‘to establish equity in shipping costs’ and help Australian businesses.
3.45
The Australian Library and Information Association submitted that it has developed partnerships with Australia Post already, and hopes to negotiate more in the future, further bolstering the sustainability of both the postal and library sectors:
Home library services for people with disability, home delivery for people who are unable to visit the library in person, the possibility of using Post Offices as pick up and drop off points for library services where the nearest library is some distance away. These are all initiatives which could further support the most vulnerable and disadvantaged in our communities.
The future for LPOs
3.46
As at July 2020, there were approximately 2,845 licenced post office businesses in Australia. LPOs are franchise businesses that provide a range of services, including postal services, retail and some financial services. Australia Post distributes income to licensees through:
Providing a percentage-based purchasing discount through the sale of letter and parcel products,
Processing and delivery fees for mail related services such as post office box servicing, and
Commissions for processing 'trusted service' transactions such as bill payments and banking; and some other subsidies, top up payments and discounted merchandise available from Australia Post.
3.47
Mrs Angela Cramp, Executive Director of LPOGroup, said that post office licensees have been adjusting to falling letter volumes for over a decade; diversifying, downsizing, relocating and adjusting their business models to ‘better meet the needs of our customers and our communities’.
3.48
Mrs Cramp highlighted the role of LPOs in managing parcel lodgements and customer enquiries about parcel deliveries, saying most customers in the post office these days are interested in what is happening with their parcels. This view was echoed by Bundanoon Post Office Licensee and Principal Mail Contractor, Mrs Gail Doyle:
Parcels are the main source of our income at Licensed Post Offices and our payments have been decoupled from the letter rate of the day to reflect that change. Australia Post needs to realign its workforce to remain viable. Posties will continue to deliver but in vans instead of bikes.
3.49
In conjunction with its licensees, Australia Post recently redesigned the payment scheme so that it aligns more closely with sending and receiving parcels, rather than letters. The LPOGroup called the payment reform ‘limited’, and said it came only after ‘extended negotiations with Australia Post’, but that it does provide a financial incentive for licensees to focus on the parcel side of the business, rather than the letters side. Further reviews of the payment scheme are planned.
3.50
Ms Nicole Sheffield, Executive General Manager, Community and Consumer at Australia Post said many LPOs have stepped up the process of diversifying their businesses during the pandemic, such as through providing Bank@Post services, especially in communities where banks have closed during the crisis.
3.51
Post offices currently provide passport applications and renewals, land title transactions, and some financial services. The LPOGroup submitted that ‘more of these service offerings are needed into the future to ensure an efficient post office network’. State and local governments could allow Australia Post to provide more basic government services, such as the ability to pay parking fines.
3.52
The LPOGoup also argued that, in its view, ‘there may be an over-supply of post offices in some pockets within the metropolitan and large provincial areas’. The LPOGroup suggested the government should provide support for a review to be conducted and that:
LPOG would welcome participation in this review to ensure that community needs continue to be met in rural and remote areas while “rightsizing” metropolitan areas to better reflect community needs.
Supporting Australian business
3.53
A number of submitters presented evidence suggesting Australia Post is playing a critical role in supporting Australian businesses during the pandemic, especially small businesses, and that this may be a growth area for the organisation into the future.
3.54
Ms Holgate drew the committee’s attention to an economic assessment of Australia Post’s contributions during COVID-19, prepared on a confidential basis for Australia Post by Deloitte Access Economics, but publicly released on 8 July 2020. Ms Holgate stated that the research demonstrated that, during the lockdown period, ‘Australia Post became the business keeper of the national economy’.
3.55
The Deloitte assessment found that more than 80 per cent of Australia’s e‑commerce activity is facilitated by Australia Post, and:
Australia Post’s delivery activities facilitated an additional $2.4 billion in e-commerce during the COVID-19 crisis to date, including $560 million for regional and remote areas across Australia–helping businesses trade at a time two-thirds of all businesses reported revenue declines;
Some 23,000 extra small business customers used the MyPost delivery service during COVID-19 each month, on average; and existing customers will have sold higher volumes, on average, either directly or through other distributors or retailers;
Australia Post helped facilitate an extra 26 million transactions that may not have occurred through in-store visits because of lockdowns–helping businesses, helping customers; and
Australia Post’s total economic contribution to GDP over the three months to May 2020 was $1.8 billion, contributing 58,800 jobs (in full‑time equivalent terms), which is 12% higher in real terms than a typical three-month period in 2016-17 when the economic contribution was last calculated.
3.56
In addition, as well as supporting a direct workforce of 36,000 people, Australia Post’s activities ‘indirectly supported an average of 24,500 [full-time equivalent] jobs per month’ in other businesses and industries, ‘through flow‑on economic activity’.
3.57
Alongside large retailers, and the National Retail Association, freight and transport organisations highlighted Australia Post’s role as a key pillar in Australian e-commerce during COVID and beyond. The Freight & Trade Alliance’s E-Commerce Reference Group proposed that, going forward, Australia Post could play a role in educating small and medium businesses ‘to understand freight and logistics when exporting in addition to the services and education provided by marketplaces and industry’.
Supporting rural and regional Australia
3.58
The unique needs and challenges of servicing rural, regional and remote Australia were a key topic of the inquiry. Some witnesses were concerned that without regulation around servicing or pricing, rural, regional and remote communities may eventually see a reduction in postal service levels, and/or unaffordable price increases.
3.59
Some submitters were concerned that the current relaxation of postal regulations could ultimately lead to a more permanent reduction in services to the regions. The Country Women’s Association of Australia (CWAA) believed the temporary regulations could be a step towards permanent changes in Australia Post’s service obligations, including eventually to rural, regional and remote communities.
3.60
The CWAA argued that, being ‘more isolated’, regional people are more dependent on the connectivity provide by the postal system, for health, social and economic reasons:
Regional connectivity is improving, slowly, and there is a long way to go in this regard. These technological improvements however, should not mean that post of physical letters, documents and parcels becomes an after-thought. An efficient, equitable and reliable postal service is just as important now for regional Australians as it ever has been.
3.61
The Communications Department confirmed that Australia Post is generally the only provider of postal services in regional, rural and remote areas, including of parcel delivery services.
3.62
In March 2020, Australia Post released the Deloitte Access Economics report, Economic and social value of Australia Post in regional, rural and remote communities. The Deloitte regional report found that Australia Post’s total economic contribution in regional and remote Australia was $806 million in value added terms and 10,802 full time equivalent jobs in financial year 2019. This was before the impacts of the pandemic. Updated data in the later Deloitte analysis (July 2020) suggests additional e-commerce activity of around $560 million was facilitated through Australia Post in rural and remote Australia from March to May 2020.
3.63
The National Farmers Federation (NFF) submitted that Australia Post is ‘a vital institution’ in regional areas, supporting a range of economic and social activity by:
...providing employment and economic opportunities, contributing to a supportive community culture and improving the liveability of these communities. In many cases, the local post office is the sole provider of delivery, financial and government services, as well as selling retail goods and providing broader community support.
3.64
Deloitte Access Economics partner, Mr John O’Mahony, noted that, with more than 80 per cent of Australia's e-commerce activity facilitated by Australia Post, regional Australia was increasingly reliant on parcel delivery services, particularly as lockdowns drive consumers to online retailing:
The limited availability of alternatives for the fast and reliable delivery of parcels between regional and remote areas means that for many businesses operating outside of metropolitan cities, Australia Post’s delivery infrastructure is essential for maintaining a high-quality experience for customers residing in other regional communities.
3.65
The NFF reported member concerns about a recent reduction in postal service levels in regional areas, including a decline in the frequency of deliveries in outer areas of Broken Hill, and called on government to ensure security of the regional postal network going forward.
3.66
The Small Business Ombudsman submitted that the lack of regulation in relation to parcel service pricing has resulted in ‘seemingly arbitrary pricing structures’. This is characterised by higher prices in rural and remote areas where there is no competition, and ‘bulk’ discounts for bigger businesses, leading to higher costs for those who ship in small quantities:
This disproportionately impacts small and start−up businesses. Small business owners in rural and remote areas who rely on Australia Post for [getting] their products to clients are also at a significant disadvantage.
3.67
The NFF also commented on pricing, suggesting that any reduction in the requirement on Australia Post to maintain a network of rural and regional post offices could threaten the affordability of regional parcel deliveries:
The NFF recognise that delivering services to geographically remote locations comes at a higher cost, but stress that price discrepancies should be fair and reasonable and not overtly disadvantage regional, rural and remote Australians and businesses… Due to its legislated obligations, Australia Post has a physical presence and an existing distribution system across Australia. This provides Australia Post with an advantage over competitors in the regional parcel delivery market. For competitors who don’t enjoy these advantages, the higher costs associated with operating a delivery service in regional Australia act as a disincentive to expand their services in these areas. Regional Australian businesses rely on Australia Post to fill this gap.
3.68
The NFF added that the pandemic has shown there is ‘huge potential’ for growth in regionally based businesses that ship parcels, but that these businesses cannot thrive without equitable and competitive postage and service from Australia Post.
3.69
The NFF recommended:
Pricing and service standards must be competitive to support regional development and growth, including as part of the post-COVID-19 recovery and to support ‘regionalisation’.
Price discrepancies between metro and non-metro locations must be fair, reasonable and not overtly disadvantage regional, rural and remote Australians and businesses.
That Australia Post recognise the large disparities in ‘capital’ and ‘metro’ vs ‘remote’ contract postage rates, and reconsider those postcodes that are classified as ‘remote’, particularly those that cover larger regional centres.
That Australia Post look into the formalisation of important services such as the two-way mail system, which is particularly important to Australians who live in remote areas.
3.70
Asked about pricing in regional areas, Finance stated:
With regard to pricing, following the recent Basic Postage Rate (BPR) increase in January 2020, Australia Post remains the second cheapest OECD country where there is a choice of delivery speed and fourth cheapest overall. Outside of the BPR which is subject to Australian Competition and Consumer Commission oversight, pricing of products and services is a matter for Australia Post.
3.71
The CEPU argued that the government should create a ‘transformed universal service obligation’ for Australia Post. The new service obligations would incorporate regulations around parcel delivery and pricing designed to ‘break down the disadvantage that comes with distance, especially for farmers, small business owners and people living and working in rural, regional and remote Australia’.
3.72
The LPOGroup submitted that maintaining a viable retail network and reliable Australia Post services in rural areas is critical. Mrs Cramp observed that the current LPO structure was created in 1990, with payments to licensees being ‘transaction based’, which can make it very difficult to make a living for regional licensee:
If you've got 300 people living in your small community, they don't sustain a post office on a transactional payment rate. There is a minimum payment for those licensees, and the minimum payment has been lifted to $40,000 as a result of the previous Senate inquiry. But $40,000 is still not a lot to run a commercial enterprise, especially if you are working from nine to five, and a lot of those smaller-type post offices are struggling to survive as a standalone outlet… But somebody has to pay for the rural and remote post offices to be there with 300 customers. It will never actually be funded well on a transactional basis.
3.73
Ms Holgate said Australia Post strongly believes ‘in the role of the post offices in communities’, and of the role of the postal service for rural and regional Australia more broadly, as evidenced during the 2019-20 summer bushfires.
3.74
The Deloitte regional report identified the following roles for Australia Post in regional communities going into the future:
As infrastructure supporting the digital and e-commerce economy, through parcel delivery and identity services, Australia Post’s role should grow. As a service centre for the growing financial services and public sector agencies, there is also considerable potential for an expansion in services.
Committee view
3.75
Even before COVID-19, the number of letters Australian households receive was in steady decline. In 2007-08, households were receiving around two letters per day; by 2021-22, it is predicted to be less than two letters per week. At the same time, parcel volumes are increasing.
3.76
There is compelling evidence to indicate that the decline in letter volumes accelerated by the coronavirus pandemic will likely be sustained. What is less clear is whether the boom in parcels is a temporary feature of the pandemic, and associated lockdowns, or indicative of a long term shift in the purchasing behaviour of Australians.
3.77
The temporary regulatory relief provided by the Australian Postal Corporation (Performance Standards) Amendment Regulations 2020 will assist Australia Post to manage its workforce and continue to meet the needs of Australians at this challenging time. However, the changes are temporary. Australia Post and its shareholder departments have work to do to develop and implement more permanent and sustainable solutions.
3.78
The committee notes the recent strategic reviews conducted into possible future directions for Australia Post by PricewaterhouseCoopers and the Boston Consulting Group. As these reviews are confidential, they were not made available to the committee as part of this inquiry, and are not available to be considered by stakeholders and those interested in the future of Australia Post.
3.79
However, recent Deloitte Access Economics research published by Australia Post demonstrates the continuing importance of Australia Post, its delivery services, and its post office network to Australia’s society and economy, especially across rural, regional and remote Australia.
3.80
There are promising indications that Australia Post may have a significant role to play in supporting Australia’s economic recovery post-pandemic. The committee is encouraged to see Australia Post positioning itself to assist small and medium sized businesses in particular to innovate, to build their freight networks, and to take advantage of future growth opportunities.
3.81
Any long term changes to the future of Australia Post’s service delivery should be made after an adequate period of public consultation to which key stakeholders and all interested Australians may contribute.
3.82
The committee believes that government should commence a broad public consultation on options for the future role of Australia Post in Australia’s society and economy.
3.83
The consultation should look at the full range of matters relating to the long term sustainability of Australia Post, including the changed domestic and global environment, the Community Service Obligations, the sufficiency of current legislation and regulations, the pros and cons of regulating parcel services and/or pricing, the adequacy of service provision to regional areas, and the future for LPOs, including the size and shape of the network, service offerings, and how licensees are renumerated.
3.84
Depending on the results of the consultation, the development and testing of regulatory and policy reforms may take some time. Particularly in light of ongoing uncertainty around the impacts of the pandemic, the committee has chosen not to recommend a timeframe for this work.
3.85
The committee acknowledges that there may be a need to consider an extension to the current regulatory arrangements, particularly if conditions associated with the coronavirus pandemic continue into 2021 and beyond. Any extension to the temporary regulations must be subject to consultation with stakeholders, and further scrutiny and disallowance by the Parliament.
3.86
Should the Australian government choose to implement future strategic changes to the postal service, the committee recommends the government commence a comprehensive public consultation on options for the future of Australia Post’s service delivery, with the results to inform future regulatory and policy reforms.
The consultation process should consider the changing domestic and global environment, reforms implemented in other jurisdictions, and proposals for reform in relation to:
the Australian Postal Corporation Act 1989 and associated regulations, and the Community Service Obligations;
regulating parcel services and/or pricing, especially in rural, regional and remote areas;
proposals for guaranteeing accessible, reliable and affordable postal services in rural, regional and remote areas;
the licenced post office network, how licensees are remunerated, and the number and location of licenced post offices;
options for expanding the service offering of licenced post offices; and
ways in which Australia Post can support Australian businesses and communities during the recovery from the coronavirus pandemic and beyond.
Senator the Hon David Fawcett
Chair