Governments should not use COVID-19 as opportunistic cover to cut services and implement pre-existing agendas. This is an important principle.
Labor senators consider the Parliament must send this message loud and clear, given the government has been swimming in a sea of dishonesty.
The evidence in this dissenting report from Labor senators addresses the evolving train of misleading arguments which have been used to justify these regulations:
1
Australia Post was going broke because of COVID – false
2
Addressed letter volumes had collapsed – false
3
Postal workers only deliver letters and were not busy – false
4
The changes were so urgent the government could not consult – false
These regulations began as a plan to cut costs, which is what the government had been considering before the pandemic.
Further, the service cuts the government claims are “temporary” are in fact intended to be permanent.
The direction of this agenda is outlined in the $1.3 million Boston Consulting Group report that was initiated in November 2019 and handed to the Finance Minister on 21 February 2020—before COVID-19 impacted Australia. The government has exercised public interest immunity to prevent the release of this document to the Senate.
Notably, the Finance Department—and not the Communications Department—contracted this body of work because the emphasis was to reduce service levels and cut costs out of Australia Post.
Labor senators note the most senior public servant in the Department of Infrastructure even gave evidence to the Senate that the Cabinet had already resolved to consider the recommendations of the BCG report prior to COVID‑19, confirming the government was considering cuts prior to COVID‑19:
MR ATKINSON: My recollection was it [the BCG report] was commissioned by cabinet to come back to cabinet for consideration, and it came back in its normal scheduled time. That just happened to be in COVID-19.
The Australia Post Strategic Review Final Report was also presented to the Australia Post Board in May 2018, which covered in detail later in this dissenting report.
The dishonest foundation on which these changes began is evidenced through the multiple untruths the government has felt compelled to tell.
Misleading narrative #1—impact of COVID-19 on revenue
First, it was claimed on 31 March 2020 that Australia Post was going to be in serious financial difficulty and therefore had to cut costs because of declining revenues. This claim was made in the media on the same day Australia Post wrote to shareholder ministers requesting regulatory relief.
For starters, evidence to the Senate has revealed that Australia Post revenues were ahead of budget as a result of COVID-19, which makes sense given the strong growth in parcels and the dominant market share Australia Post has in that segment.
Labor senators also note evidence to the Senate has established parcel volumes in April 2020 were 37.2 per cent higher in April 2020, than in March 2020.
Embarrassingly, the government was even subsequently forced to admit that ‘[r]evenue generated through reserved service letters was higher than budget in March 2020’, despite the claims made on 31 March 2020.
In other words, the narrative given to the public was at odds with internal facts and figures available to the management of Australia Post.
Misleading narrative #2—impact of COVID-19 on addressed mail
On 21 April 2020, the day the government announced its decision to amend the regulations without any prior consultation, the Australia Post CEO made the following claims to the Sydney Morning Herald:
Letters have dropped 50 per cent some days and unaddressed mail, used by businesses for promotional material, has collapsed by 75 per cent. Passport business is down 50 per cent.
‘It's almost like we have had five or 10 years squashed into one month,’ Ms Holgate told The Sydney Morning Herald and The Age. ‘The amount of decline that we could probably have expected over five years has happened in letters, but in parcels there has also been that massive growth.’
On 1 April 2020, the Australia Post CEO was also quoted in The Australian as saying; ‘In just the last week we have witnessed our letter volumes fall over 30 per cent’.
However, the Senate subsequently obtained evidence which showed the claims about addressed letters in March and April were not just selective exaggerations, but outright nonsense.
Addressed letter volumes actually increased from 139 million in February 2020 (before COVID) to 155 million in March, an increase of 12 per cent.
And then in April 2020, addressed mail volumes were 139 million—on par with February 2020 before the COVID shutdown began.
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February 2020
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March 2020
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April 2020
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|
Addressed letter volumes
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139 million
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155 million
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139 million
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Australia Post claims in media about letter declines
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-30%
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-50%
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Actual addressed letter trends compared to February 2020 baseline
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+12%
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0%
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Why did the Government feel the need to so mislead about this at the time of amended regulations were announced?
Misleading narrative #3—the Minister claiming posties didn’t deliver parcels
On 26 June, the Minister for Communications wrote to Senator Fierravanti‑Wells and claimed postal delivery workers were not busy enough and that the amended regulations would ensure they have work to do.
Front-line postal workers have never been busier and this was an incredibly ignorant and uninformed assertion to make.
The minister also wrote to a Senate scrutiny committee claiming the amended regulations were making it possible for the postal workers “previously dedicated to handling and delivering letters” to be liberated and redeployed to deliver parcels.
This is also false. There is no such thing as a postie dedicated to delivering letters.
Posties deliver parcels and letters, including essential medicines—and have done so for years every day of the week.
Labor senators note the Executive General Manager of deliveries at Australia Post gave the following evidence to the Senate in 2018 which dismantles the false assertions made by the Minister:
MR BARNES: Today we see nearly 45 per cent of all parcels delivered by posties. So when you think of the context of the letters declining at 10 per cent per year, that's been a big boost for our posties in keeping them busier out there. We expect to see that close to 50 per cent within a year and a half.
This indicates postal workers delivered 150 million more parcels in 2019 than the minister would like to acknowledge.
Why would the minister feel the need to make such a false and unnecessary assertion?
The minister has used such language in letters and in Question Time to imply postal workers have less and less to do as letter volumes decline, but in fact, as letter volumes decline, postal workers deliver an increasing volume of small to medium sized packets and parcels.
The government then tried to misrepresent the volume of parcels being carried by postal delivery workers, only to have the CEPU expose the tactics of seeking to manipulate productivity data during the public inquiry:
Mr Murphy: We had concerns about the modelling with the ADM going on. Initially, Australia Post's modelling showed that our posties only averaged—in Australia Post's modelling—around 50 parcels a day. On average—this is reported to the union precisely—they carry up to 90 a day. In particular, on many days they're above the 90. Lee could talk to these points. They're carrying more than 90 packets or parcels a day at the moment. We put the pressure on Australia Post early on, when they finally came to us about this ADM, and said that their modelling was simply wrong. Currently with four posties today, averaged over four rounds at 90 parcels, that's an average of carrying 360 packets and parcels today over four rounds. What Australia Post was proposing—by their modelling—was showing, in essence, that their modelling was wrong, moving forward at the ADM. When we challenged these numbers, we saw posties complaining to us that, all of a sudden, their packets and parcels were dropping off from their delivery bag on a daily basis and being shifted to contractors. We believe this was, in essence, to try to match up the average being provided to us of them only carrying 50 a day, when in fact we were providing figures that they were carrying 90 a day. [emphasis added]
Senator MARIELLE SMITH: Just to clarify: prior to COVID-19, can you tell me what proportion of a postie's products would be parcel and packet based as opposed to letter based?
Mr Murphy: Ten years ago they were carrying around 1,200 letters a day in their pannier bags on their motorcycles. Today, prior to COVID-19, that would have been around the 400 or 500 mark. They were carrying, in essence, on average 90. Some days, and Lee will report, they carry 150 packets or parcels, depending on the volume. So more than 50 or 60 per cent of their work today is already packets and parcels on their rounds.
Senator MARIELLE SMITH: So to anyone who is under this misleading impression that our postal workers aren't trained in parcel deliveries, what would you say?
Mr Murphy: They absolutely deliver them today.
Labor senators consider non-commercial actions inside a publicly owned Government Business Enterprise, to manipulation productivity and operational data for political purposes, may warrant examination by the Auditor General.
Misleading claim #4—the government claiming there was no time to consult
The Minister for Communications has claimed the government did not have time to consult with anyone because the circumstances were so urgent.
However, Australia Post wrote to members of Parliament in the week of 10 August 2020 advising the alternate day delivery model was only just coming into effect by 31 August 2020.
This is more than 120 days from the government announcement on 21 April 2020.
What exactly has been happening in those 120 days?
If the changes were so urgent such that the minister claims he could not consult anyone about them — then why has it taken four months to implement them?
And why did the Minister for Communications refuse to give postal unions a copy of the draft regulations when they met with him on 27 April 2020?
Labor senators contend this is because the delivery model designed by Australia Post was done on the explicit basis that 1 in 4 postal workers would not be assigned to a role, which is precisely what was set out in their internal briefings.
Management and government had planned to make 1 in 4 postal workers redundant, by targeting older workers, and evidence to the committee is this is what postal workers were being told around the country by their own local managers:
Senator GREEN: I will have some questions about the MOU a little later. Can I just be clear so that this is understood: there is the document that you were briefed with, which shows that Dan is no longer assigned to around, no longer has a round to perform. And what you're saying today is that that information was not only briefed to you, it was also briefed to senior management and also out to workplaces?
Mr Murphy: Correct. They were briefed at workplaces similar to Lisarow—and I'm sure Lee can comment— that one in four posties no longer had a job to do.
Senator GREEN: Mr Morton, was that the briefing that you received?
Mr Morton: From our management at our delivery facilities, yes.
Senator GREEN: Mr Morton, what exactly were you were told? We need some details here, if you've got them, because this is quite important. In your workplace, what exactly were you briefed and who were you briefed by? What did they say about that fourth postal worker, what did they say was going to happen to Dan?
Mr Morton: Management told us there'd be four runs. One would be delivering parcels and one would be delivering mail. There'd be two people, doing beat 1 and beat 2. That day they'd be delivering parcels. Beat 3 would be delivered mail, of four rounds. It makes sense that, if there are only three people delivering, and there are four rounds, it will be delivered the next day. Where has the other person gone? Where has the fourth person gone if they haven't got somewhere to deliver?
Once Labor and the unions combined to put a stop to the planned job cuts, Australia Post went back to drawing board and have spent months trying to figure out how to integrate the fourth postal worker into a model that was only designed for three.
Recommendations
Recommendation
The regulations be disallowed to send the government a clear message that COVID-19 should not be used as cover for their pre-existing agendas.
Recommendation
The Auditor General examine the surveillance directions of senior Australia Post management, which resulted in the monitoring of staff emails and phone records, for compliance with internal company policy and Australian law.
Recommendation
The Auditor General examine financial expenditure within Australia Post for the final quarter of financial year 2019-20, for irregular spending directions and activity, and potential statistical manipulations, that were guided by political objectives, and not commercial objectives.
Recommendation
The Government release the Boston Consulting Group review of Australia Post report which was handed to them on 21 February 2020.
Recommendation
The 31 March 2020 letter from Australia Post to the Minister for Communications and Minister for Finance, requesting regulatory relief, be publicly released.
Recommendation
Australia Post review its procurement principles and seeks to incorporate sections of the Commonwealth Procurement Rules into these principles, particularly relating to local content of purchases.
The following sections outline key evidence that was provided to the Senate inquiry in relation to 2018 Strategic Review, and the withholding of mail.
These changes have been planned for some time
Labor senators are of the view that the changes that Australia Post is seeking to impose with these regulations has been the plan for some time and that they will be more than temporary.
The Australia Post Strategic Review Final Report was presented to the Australia Post Board in May 2018. Labor senators contend that recommendations in the report go to the simplification and modernisation of the regulatory framework, while seeking direct changes to:
The recommendations of Ms Holgate’s strategic review from 2018 are almost identical in outcome to the regulations before this inquiry.
Although the CEO of Australia Post disputes Labor senators’ claims:
Ms Holgate: I do not recall ever saying in my strategic review in May 2018 that I wanted to close post offices in rural and regional Australia. On the contrary, I've fought for Bank@Post.
Senator KIM CARR: That's what the report says, doesn't it?
Ms Holgate: No, it doesn't.
Although, Labor senators understand that section 8 of the Australia Post Strategic Review makes recommendations for regulatory change that directly impact retail outlets.
In questions on notice Australia Post did finally concede that there were ‘conceptual similarities’ between the Australia Post Strategic Review from May 2018 and the regulations in before the committee:
Options identified under the heading 'Simplification and modernisation of the regulatory framework' included seeking modification to Australia Post’s prescribed performance standards. While acknowledging some conceptual similarities…
This evidence from Australia Post combined with the evidence from the National President of the CEPU/CWU led Labor senators to hold the view that the claims that this regulatory relief are simplify temporary are insincere:
Mr MURPHY: By way of example, 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.
Community Service Obligations
Since 1989, Australia Post has operated as a Government Business Enterprise (GBE) under the Australian Postal Corporation Act 1989 (APC Act).
The APC Act provides for a set of community service obligations (CSOs) that must be adhered to in relation to Australia Post's letter service.
The CSOs describe the requirement for Australia Post to provide a reliable and accessible letters service for all Australians.
Section 27 (3): “Australia Post shall make the letter service available at a single uniform rate of postage for the carriage within Australia …”
Section 27 (4a): “Australia Post shall ensure, that in view of the social importance of the letter service, the service is reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business.”
Section 27 (4b): “Australia Post shall ensure that the performance standards (including delivery times) for the letter service reasonably meet the social, industrial and commercial needs of the Australian community.”
These new regulations impact these obligations and standards.
Throughout the hearings there were several exchanges that related to the Australia Post Strategic Review Final Report, dated May 2018.
Labor senators contend that this 2018 report has recommendations that are enacted by the Australian Postal Corporation (Performance Standards) Amendment (2020 Measures No. 1) Regulations 2020:
Senator KIM CARR: Well, suddenly it's cuts to services. What troubles me about this report is that there are numerous references—numerous references!—to recommendations which mysteriously appear in these regulations that you say are temporary: increasing delivery timetable for regular letters, increasing priority delivery timetables, reducing the number of SPCs to 10,000. I can go on and on: reducing the number of service outlets in the country. This is a report that you presented to the board which you say was part of the structural change you were seeking. Your report, as you describe it, mysteriously turns up as part of these temporary regulations. How do you account for that?
Ms Holgate: The temporary regulations are not what's in that report. The temporary regulations are for relief for letter standards inside metro areas. We need support for delivering parcels. If you have a better view, Senator, on how we can deliver these parcels faster, how we can support this country better—
Senator KIM CARR: It's not my job to give a better view. My job is to ask you to answer the questions accurately.
Ms Holgate: I believe I have answered them—
Recommendations in the report go to the simplification and modernisation of the regulatory framework, while seeking direct changes to retail access, delivery frequency, delivery timetable, pricing and delivery timetable.
Senator KIM CARR: Sure. I just want to know whether or not, under the heading 'Simplification and modernisation of the regulatory framework' in your report, a number of the recommendations that appear in these so-called temporary regulations were contained in that report?
Ms Holgate: I have not got a copy of the report in front of me.
Labor senators are disappointed that Australia Post officials sought to avoid answering questions around the review in the hearing but confirmed the existences of the review and parts of it contents through questions on notice:
Information presented by management to its Board of Directors is commercial-in-confidence. Publication of such information is likely to cause detriment to Australia Post as a consequence of confidential communications between management and its Board of Directors being publicly available. Notwithstanding, a report presented to the Board in May 2018 identified a number of strategic options for consideration in the interests of preserving Australia Post’s financial sustainability. One option referred to was asking the Shareholder to consider temporarily funding the CSO in rural and remote locations, however the report identified clearly that this option would not be likely to be supported.
Slowing down the mail
Throughout the hearing Labor senators contended that Australia Post was slowing down the mail in a premediated fashion and COVID-19 is just the cover for its implementation:
Senator KIM CARR: Can you confirm that your report to the board in May 2018 calculated that the financial impact of increasing the delivery timetable, which you describe in the report as 'slowing down the mail', would have a cost saving of $184 million per annum?
Ms Holgate: I can't, Senator, because I don't have a copy of the report in front of me.
Senator KIM CARR: But you'll be able to take that on notice, won't you.
Ms Holgate: I'm happy to take it on notice.
In questions on notice Australia Post confirmed that:
Information presented by management to its Board of Directors is commercial-in-confidence. Publication of such information is likely to cause detriment to Australia Post as a consequence of confidential communications between management and its Board of Directors being publicly available. Notwithstaing a report presented to the Board in May 2018 identified a number of strategic options for consideration in the interests of preserving Australia Post’s financial sustainability. One option referred to, estimated at the time to have an approximately $184 million per annum cost saving but not recommended for consideration at the time, was – after addressed letter volumes had declined beyond a level not at the time anticipated for many years – increasing the delivery timetable for regular letters by three days.
The impact of such a change in Australians would be significant.
For Australians living in rural and remote areas, this change could mean a delivery standard of up to 10 days, depending on where the letter originates.
To ‘slow down the mail’ would significantly reduce the utility of transactional mail requiring a payment, like bills. Which so many vulnerable Australians rely on.
Labor senators remain unsatisfied by Australia Post’s responses that these so called temporary regulations have not been under consideration or development for some time:
Senator KIM CARR: Alright. It's just that you've said there are some major differences, and, from my reading, the strategic review also recommended a reduction in rural post offices and delivery times and a change in the structure along the lines you've just outlined, one of which you did present to the board in May, which I understood was your position, and now you're saying there are similar recommendations in Boston which you didn't agree with. Have I understood that correctly or not?
Ms Holgate: I do not recall ever saying in my strategic review in May 2018 that I wanted to close post offices in rural and regional Australia. On the contrary, I've fought for Bank@Post.
Senator KIM CARR: That's what the report says, doesn't it?
Ms Holgate: No, it doesn't.
Australia Post’s conduct during the inquiry
Labor senators echo the concerns of the broader committee on the way that Australia Post has conducted itself with this inquiry and the Senate more broadly.
Labor senators are of the view that the conduct of senior officials from Australia Post have not met the standard that is expected of them in meeting their obligations as a Government Business Enterprise.
Attempts to avoid parliamentary scrutiny and transparency are not what Australians expect from their national postal delivery service.
Failing to provide information on the basis of commercial-in-confidence may be an acceptable tactic in private logistics company, but it is not acceptable to the Australian Senate when an insufficient reason has been given.
The answers to questions about Australia Post’s Community Service Obligations is one area where Labor senators feel Australia Post has not met this standard:
Senator KIM CARR: Okay, I'll take your questions on notice and pursue this further. The CEO has made comments, certainly to Senator Patrick, about the community service obligations. You said—if my notes are correct; please clarify if necessary—that to your knowledge 'there's been no discussion with regards to the community service obligation'. Is that your evidence?
Ms Holgate: On the overall community service obligation, other than the temporary regulatory relief.
Senator KIM CARR: I see. You indicated to me earlier that your report entitled 'A final report and strategic review' was presented to the board in May 2018. There was a specific section on the community service obligation and a recommendation, which you presented to the board, that 'Australia Post requests that the shareholders consider funding the CSO in rural and remote locations for a five-year transitional period'. Do you recall that recommendation?
Mr Macdonald: If I could, Chair. We talked about these reports earlier. I think it's important for us to note that this particular report was prepared on a confidential basis, provided to our shareholder department—
Senator KIM CARR: Sorry, who's speaking?
Mr Macdonald: My name's Nick Macdonald.
Senator KIM CARR: You're the chief counsel, right? You'd know something about parliamentary procedure, surely? I've asked the CEO for a direct answer, given that she's provided evidence and there are quite serious implications for giving misleading evidence to a Senate committee. We've been specifically told that this matter had not been discussed, to this witness's knowledge. I'm just trying to establish: was it the case that this report, which she presented to the board in May 2018, specifically recommended changes to the community service obligations?
CHAIR: Senator Carr, can I clarify? Was the recommendation you read out from an Australia Post report?
Senator KIM CARR: Yes, an Australia Post report, Mr Chairman, presented by the CEO to the board.
CHAIR: The recommendation you read out was seeking funding by the stakeholders, not a change to the CSO?
Senator KIM CARR: That's right. I've read it accurately, have I not, Ms Holgate? Have I accurately reflected the recommendation that you put to the board?
Ms Holgate: My apologies, Senator, I don't have a copy of that report in front of me. It is a confidential document.
Senator KIM CARR: Well, it's not that confidential. I'm asking you now, did you make that recommendation to the board?
Ms Holgate: I've given you an answer, Senator. I'm happy to take it on notice. I don't have a copy of the document in front of me.
Australia Post should closely follow Recommendation 1 of the committee’s report and lift the standard of its presentation to the Australian Senate.
Labor senators look forward to seeing the benefit of this training the next time Australia Post presents before the Senate.
Australia Post procurement
Throughout the hearing Labor senators put questions to Australia Post about fleet procurement decisions and their impact on delivery services and standards.
It is acknowledged that Australia Post does not have to conform to the Commonwealth Procurement Rules when making purchasing decisions, however Labor senators are of the view that Australia Post’s procurement processes are inconsistent and do not stack up when they are placed under scrutiny.
Following an Australia Post press release (see Australia Post Media Release below) issued on 12 June 2019, entitled ‘Boost for local jobs through Australian built e-vehicle trial’, Australia Post was asked a series of questions about the trial and agreements Australia Post has with the manufacturer.
In the press release Australia Post claims ‘we are looking at ways to keep our posties delivering for Australians and supporting local manufacturing businesses’. But when asked about the agreement with the firm, Australia Post responded:
Details of Australia Post’s agreement with a third party are commercial-in-confidence. Publication of such information is likely to cause detriment to those third parties as a consequence of their commercially sensitive information being publicly available.
When asked about how many bikes Australia Post had been ordered locally:
Senator KIM CARR: That's right—if you can. But you're leaving this manufacture high and dry.
Mr Hindle: That is not correct.
Senator KIM CARR: How many vehicles have you actually purchased from them?
Mr Hindle: Through Stealth?
Senator KIM CARR: Yes.
Mr Hindle: None.
Senator KIM CARR: None!
Australia post did confirm to the committee that they had purchased 2,100 three-wheeled electric delivery vehicles from a Swiss firm Kyburz Switzerland AG. When asked what was the value of the contract with Kyburz Switzerland AG, Australia Post answered: ‘[t]he value of orders made from Kyburz Switzerland AG is confidential’.
Labor senators do find this answer concerning, given that this is Commonwealth money and the last order was made September 2019. There is no justification for withholding the details on this expenditure from a Senate committee.
What was more concerning was Australia Posts admission that there was justification for an open tender on the procurement of the electric assisted mail bicycles, but the same justification was not there for the three wheeled electric delivery vehicles instead choosing to undertake: ‘Market research, consultation with a number of postal operators including Swiss Post, and discussion with two potential suppliers’.
It seems that Australia Post makes loud overtures about supporting local firms with their procurement but when it comes to the facts, they don’t stack up.
Labor senators are concerned about the ad hoc, inconsistent and secretive nature of Australia Post procurement processes, and urges Australia Post to take immediate action.
Thus Labor senators are recommending that Australia Post review its procurement principles and seek to incorporate sections of the Commonwealth Procurement Rules into these principles, particularly relating to local content of purchases.
Senator Nita GreenSenator Marielle Smith
Committee memberCommittee member
Senator the Hon Kim Carr
Participating member