10.1
This chapter sets out the evidence received by this committee on the future of Australia Post for Australians living in rural, regional and remote communities.
10.2
It covers the following matters related to Australia Post's provision of services to regional and rural communities:
relevant Australia Post community service obligations (CSOs);
Deloitte Access Economics (Deloitte) research on the economic and social value of Australia Post;
the effects of regulatory relief and other recent policy measures on regional and rural communities; and
the risks of privatisation to Australia Post's services to regional and rural communities.
10.3
This chapter then sets out the Environment and Communications Legislation Committee's (committee) views and recommendations.
Australia Post's community service obligations to rural and regional communities
10.4
As outlined in Chapter 3, Australia Post has legislated obligations to provide services in its four CSOs, which are set out in section 27 of the Australian Postal Corporation Act 1989 (the Act). Three of these CSOs apply to services provided to regional and rural communities, namely that:
the service be available at a single uniform rate within Australia for standard letters;
the service be reasonably accessible to all Australians wherever they reside; and
the performance standards for the service reasonably meet the social, industrial and commercial needs of the community.
10.5
These CSOs are, in part, designed to ensure that Australian communities have equal access to services at the same prices across both metropolitan areas and regional, rural or remote locations.
10.6
CSOs are underpinned by Performance Standards, which are set out in the Australian Postal Corporation (Performance Standards) Regulations 1998 (Performance Standards Regulations), which are set out in Chapter 3 of this report.
10.7
The Australia Post Annual Report 2019 noted that all Performance Standards relating to delivery and collection of mail frequency are being met or exceeded, including in regional and rural areas, as set out in the table below.
10.8
Some aspects of these Performance Standards have been temporarily suspended until 30 June 2021, under the government's relief of Australia Post's regulation. Evidence received on the effects of the temporary regulatory measures on regional and rural communities is discussed below.
Deloitte Access Economics: Economic and social value of Australia Post in regional, rural and remote communities
10.9
In 2020, Australia Post commissioned Deloitte to undertake a report into Australia Post's contribution to the economic and social health of regional, rural and remote Australian communities (Deloitte Report).
10.10
This report recognised the central role of regional, rural and remote communities in the Australian economic and social fabric. It observed that more than 8 million Australians live in these areas, and that businesses in the regions account for approximately 40 per cent of Australia's GDP. It also recognised Australia Post's broader importance in and to these communities:
An important institution in enabling thriving regional communities is Australia Post. It has a significant physical presence–over 2,500 post offices–across Regional and Remote Australia. Australia Post delivers economic and social value to these areas through the provision of services, with one-third of its total financial transactions and almost 40% of its total parcel collections occurring in Regional and Remote communities. The value of providing services to these areas is much higher than the prices charged and revenue earned by Australia Post, as evidenced by the large consumer surplus associated with the use of these services, particularly in Remote areas.
10.11
The 2020 Deloitte study found compelling evidence that Australia Post is an important economic institution in regional and rural communities, supporting Australia Post's figures of an estimated 10 802 full time equivalent jobs in regional and remote Australia through its delivery and post office network, and facilitating $806 million of economic activity outside metropolitan centres.
10.12
Deloitte estimated that regional economies and new e-commerce models meant regional and rural businesses were worth around $10.6 billion in 2019 to the Australian economy. Regional business owners, the report found, rely on Australia Post's unparalleled post office and delivery networks to power their enterprises, making an average of 25 visits over a six-month period to a post office. Moreover, in 2019, regional post offices facilitated 28.8 million financial transactions, including banking and bill paying, as well as around 1.6 million identity verifications.
10.13
Beyond its significant economic role in the regions, the social value of Australia Post in these areas is also considerable. Deloitte found that:
Post offices are the most present service provider in regional and remote Australia, with 96 per cent of residents having a local post office;
Australia Post is among the most trusted service providers in these areas;
People with disabilities consume post office services more frequently than average, and socially distanced individuals visit the post office more often;
90 per cent of regional and remote residents believe that Australia Post is important for equity of access to core services; and
Almost one third of regional and remote Australians believe their post office's role as a service provider has increased in importance over the last five years.
10.14
Regarding the future of Australia Post, Deloitte noted the challenges of declining letter volumes, but suggested there are many opportunities, particularly in non-metropolitan areas:
…there are several reasons to believe that Australia Post services may grow into the future, above the continued role for at least some hardcopy postal service for certain documents and to serve certain customers. 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. Finally, as a trusted institution that enjoys the support of communities, there will be considerable resistance to a contraction of presence or services.
10.15
The Deloitte Report concluded:
Overall, [the evidence] suggests that Australia Post continues to provide important economic and social infrastructure to regional, rural and remote communities. Moreover, as other service providers close their physical branches in regional Australia, there may be even more opportunities for Australia Post to deliver services and value to these communities in the future. For example, the post office network could be well-placed to increase offerings in financial and government services, or provide more e‑commerce and other network capabilities. Australia Post's presence and services in regional, rural and remote communities are therefore likely to continue to remain relevant in the future.
Recent policies and regional, rural and remote communities
10.16
The committee received evidence on the effects of recent Australia Post-related policies on regional and rural communities, which this section will discuss in turn:
regulatory relief of CSOs and the Alternative Delivery Model (ADM);
the opportunities provided by financial and other services; and
recent attempts to ban perishable produce.
Regulatory relief and the Alternative Delivery Model
10.17
The temporary regulatory relief implemented by the government in 2020 explicitly excluded regional and rural areas from the loosening of CSOs. For example, Australia Post issued an update on 12 August 2020, which stated unequivocally:
The Australian government has temporarily changed some of our performance targets to help us meet the challenges of COVID-19 restrictions and other operating constraints. New delivery frequencies apply in metro areas until 30 June 2021.
There's no change to delivery frequencies in rural and remote areas.
10.18
However, despite the exclusion of non-metropolitan areas from the temporary regulatory relief arrangements, the committee received evidence that this had not been the case in reality.
10.19
For example, representatives of the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the Community and Public Sector Union (CPSU) stated that they were certain that the temporary regulatory relief arrangements had profoundly negative effects on regional and rural service delivery standards.
10.20
Mr Shane Murphy, National Divisional President of the CEPU, provided examples of where mail was taking longer to reach regional and rural customers:
As you know, there are regional areas caught up in this regulation change—Tweed Heads, Townsville, Geelong, the South Coast, the Central Coast and the Hunter region, including Port Stephens. Those areas are no longer getting daily delivery services. And, when it comes to their second‑day delivery services, they are not even able to receive their mail or parcels on the day they are due. Our posties at these facilities are bringing product back—or they're not taking it out. They simply cannot do what they were doing for the community pre-ADM, when the product was delivered on a daily basis.
10.21
The CEPU clarified that Australia Post had re-zoned some regional capitals to metropolitan areas, based on guidance from 1991, and in doing so made them subject to the ADM. This means, the CEPU claimed, that growing regional cities with populations over 100 000, such as Bendigo, Cessnock and the Hunter Valley, were now classed as 'metro' and therefore included in the reduced service-level ADM.
10.22
Mr Martin O'Nea, an Industrial Officer for the Communication Workers Union, Postal and Telecommunications Branch, Victoria (CWUVIC), provided a further example of the effects of this re-zoning:
…there were a number of exclusions in regional Australia for the rollout of the ADM, and it was only supposed to happen in regional areas in Australia. I think you've heard evidence already that that's not the case. The one standout exclusion in Victoria for us, I suppose, was Geelong, which previously was classed as regional. It was then changed some years later to metro and, even though we requested Australia Post to acknowledge Geelong is in a regional area, they refused. They just wanted to roll out the ADM in as many places as possible.
10.23
Regarding the definition of regional communities, Australia Post has stated:
Australia Post does not have the ability or discretion to determine which areas are, or are not, metropolitan areas.
Metropolitan, rural and remote areas are defined by the Rural, Remote and Metropolitan Areas Classification 1991 Census Edition that applies to Australia Post's prescribed performance standards. A metropolitan area is a State or Territory capital city, or an urban centre with more than 100,000 residents, according to the 1991 Census.
10.24
The Department of Communications confirmed that there had been no discussion or consideration of extending the regulatory relief measures including the ADM to regional and rural communities.
Intended changes to Australia Post's carriage of perishable food products
10.25
Australia Post announced on 18 April 2021 that it would cease to carry certain kinds of perishable consumable goods from 1 July 2021, due to the 'complex regulatory requirements differing across states and territories'. This included meats, seafood, frozen meals and other products.
10.26
This announcement was met with widespread opposition from several sectors, including producers of consumable goods and small businesses that rely on Australia Post to service their customers, particularly from regional areas.
10.27
For example, an ABC article on the effects of the new policy noted:
The owner of a NSW Truffle business that was 'devastated' by the shift, who said: 'We'd been using express post and have been very happy and confident in telling our customers that if they purchase fresh truffles, Australia Post will get it to them within a day or two… I can only imagine that using a courier or other means of transport will be extremely expensive and not as reliable and not as efficient';
The co-owner of a Tasmanian salmon farm business sending around
$80–100 000 worth of freight a year with Australia Post, who commented: 'We as a business community had a meeting with Australia Post and suggested that they ask for a 12-month reprieve or moratorium, and that they go to each state regulator and have an open discussion about how to get this sorted… The government has been pushing to buy online and use COVID-safe delivery, so everyone is spending thousands upgrading their systems and now the only carrier specifically for Tasmanians–that has a door-to-door reach for all of Australia–can't do that now'; and
A NSW cheese company manager, who said: 'Now with Australia Post removing that service, it does limit our ability to move our product to a wide distribution at a price that's fair and reasonable… We are trialling a couple of other companies now, but because these are perishable items there's no guarantee. It's at your own risk'.
10.28
Although the perishable food ban was not the main focus of this inquiry, the committee received evidence that suggested there had been little consultation with stakeholders before its introduction.
10.29
Some suggested that this was an example of the broader failure of Australia Post to consult on policy more generally. For instance, Mr Andrew Hirst of the Licenced Post Office Group (LPOGroup) told the committee that she saw this policy as indicative of the attitude of the new Acting Group Chief Executive Officer and Managing Director (CEO) of Australia Post, Mr Rodney Boys, and observed that:
Australia Post management never consult. It's not in their vocabulary. They say they consult but they have no understanding of the word 'consult'. They consulted with us by sending us a letter saying that this was taking place… It was 'inform'. We were informed of their decision-making processes.
10.30
After considerable stakeholder opposition to these measures clearly emerged, Australia Post announced it would not proceed with these changes. Instead, it announced that it would continue to ship perishable goods, and intended to 'work collaboratively to find solutions' to state-based variations in shipping regulations with Small Business and Family Enterprise Ombudsman,
the Hon Bruce Bilson. In announcing the reversal of these changes, Mr Boys stated:
We recognise the original date for ceasing perishable transport through our network would cause significant disruption to small businesses, many who have experienced significant growth in eCommerce sales during COVID-19... Through this new forum, we will better understand what our customer capabilities and needs are and work hand-in-hand with regulators to determine, where changes may be required.
Banking and financial services
10.31
The committee received evidence that suggested Australia Post's Bank@Post service had transformed access to banking services for many communities, where banks had closed their retail outlets. This evidence provided an example of the substantial opportunities for Australia Post in regional and rural areas, as well as expressing a hope that the program would continue into the future.
10.32
In announcing the new arrangements in October 2018, then-CEO,
Ms Christine Holgate outlined the scale of the problem the new Bank@Post deal would address for regional and remote communities:
There are 1550 communities across Australia, predominantly in rural and regional Australia, who today have no bank branch. The citizens and small businesses of these communities depend on Australia Post to provide access to financial services through the Bank@Post service in their local Post Office.
10.33
Ms Holgate, the former CEO of Australia Post appearing in a private capacity, suggested that securing the Bank@Post program had not been easy, given substantial losses in its first year of operation:
Fifty-five per cent of the communities of Australia no longer have a bank. This particular service lost $48 million in the year before CBA committed to actually working with us… So we were faced with closing the service, and this transaction [the renegotiation of the Bank@Post contracts] saved that service, brought that important investment into the post offices and, very importantly, enabled the [licenced] post offices to have a new technology platform. They had had none in 30 years—none. I just think it's staggering that we were actually letting them operate on such an old system.
10.34
Ms Gail Doyle, New South Wales Chair of the LPOGroup and the licensee of a regional post office in NSW, confirmed the value of the Bank@Post, both for LPOs and for regional communities:
I'm the licensee of Bundanoon post office in New South Wales, a regional centre, and during COVID we witnessed the closure of many bank branches in our closest town, which is a good 15-minute drive from Bundanoon or a 30-minute bus ride for some of our elderly people who don't drive. Those branches were closed, the ATMs were ripped out of the streets and the only option was for these members of our community to come to post offices to do their banking. If we weren't there, the services wouldn't be on offer. It was terrifying for these people, especially moving throughout the community during COVID and being susceptible to the virus. So it was very important that banking services had been implemented in post offices well before COVID began, because it was a life saver for the communities of Australia, especially in rural and regional centres.
10.35
Ms Cramp, Executive Director of the LPOGroup, expressed some concerns that the future of some Bank@Post service agreements were uncertain:
I have massive concerns. Why aren't they already renewed? Why aren't we already comforted with 'we're doing this, and they will be turned over'? We have only two that expire in September. The CBA signed on for five years. But, yes, we are very concerned that part of the BCG report says to decrease financial services.
10.36
Representatives of BCG suggested that the 2020 BCG Report found there were significant opportunities for Australia Post to extend and consolidate financial services in regional and rural areas. This would not only provide essential services to communities where banks no longer have branches, they stated, but also bolster the income and purpose of LPOs in those communities.
10.37
Mr Di Bartolomeo commented that Australia Post was intending to renew the Bank@Post arrangements, and that negotiations with participating institutions are 'currently underway'.
10.38
Similarly, the Hon Michael Ronaldson, a Non-Executive Director of Australia Post, commented that the Board was excited by the Bank@Post refresh in 2018, and that Australia Post remained committed to the service:
…there are now 80-odd organisations, from recollection, who are involved in Bank@Post. There are minor financial institutions. It is a fantastic initiative and quite frankly…this is a really, really important thing for regional and rural communities. As the banks pull out we are filling that space. We want to expand that and extend it, not in any way reduce it.
Risks of privatisation of Australia Post to regional and rural communities
10.39
This report has previously discussed the BCG Report undertaken for Shareholder Ministers, which canvased the divestment or privatisation of parts of Australia Post, including parcel deliveries.
10.40
As outlined in the previous chapter, the BCG Review noted the negative consequences for regional and rural communities from both privatisation of the parcels businesses, as well as from more aggressive pricing of parcels. For instance, several papers prepared for BCG Steering Committee meetings discussed:
potentially negative side effects of Australia Post being directed to operate its Parcels business with a 'wholly commercial focus', which could include 'up-pricing in non-metro, [and] ceasing any unviable coverage', and consequential 'implications for senders and receivers (e.g. % priced out in non-metro)'; and
that simply 'reducing affordability for as many as 2 million citizens in non‑metro areas', that is by lifting prices for rural and regional Australians, 'may have problematic commercial flow-on effects', for instance making services unaffordable for everyday people and businesses.
10.41
The committee considered some evidence that privatisation of Australia Post's parcel capacity would have a disproportionate effect in regional and rural areas. For example, Mr Greg Rayner, the National Divisional Secretary of the CEPU, claimed that any privatisation of Australia Post would adversely affect regional and rural communities:
The privatisation of Australia Post in part or in whole would be disastrous for rural and regional communities, small businesses and the families of tens of thousands of dedicated postal workers who provide a world-class service to the Australian people.
10.42
A Department of Communications regulation impact statement prepared for proposed 2015 Australia Post reforms, noted that 'removal' of the CSOs as part of deregulation of the postal market would disproportionally affect users in regional and rural areas:
Removal of the CSOs (as one element of deregulation of the postal market) would significantly impact consumers in regional communities. Such a move is unlikely to result in the introduction of significant competition in the delivery of letters and small parcels in regional Australia, due to the significant distances, high costs and relatively low volumes involved.
10.43
The Chair of Australia Post, Mr Di Bartolomeo suggested that there were no plans for the organisation to implement cost cutting measures for LPOs, including those outside of metropolitan areas:
I can guarantee that the work that we're doing today in the corporate plan that is currently in place, and the new corporate plan, as our annual strategic planning process is in place—we have absolutely no plans to change the LPOs and particularly the rural and regional arrangements… We certainly will not be closing or reducing any of the LPOs.
10.44
Mr Di Bartolomeo made it clear he expected that this would be the case going forward, with Mr Paul Graham commencing as CEO in September 2021:
I believe we've appointed a CEO that will take up the reins of what [Ms Holgate] left it with and continue forward and onwards. The LPOs, for instance, and their concerns about potential privatisation and the like—there is no such evidence and no such initiative on the board's part, in our corporate plan, in our corporate strategy. We're developing our next round of corporate planning, and there is absolutely no such desire or intent to do that, to change, particularly, the regional and rural LPOs that are out there in the system.
Committee view
10.45
Evidence received by the committee showed that Australia Post brings significant economic and social benefits to regional and rural communities–and that, in turn, those communities bring immense economic, social and community benefits to our nation.
10.46
It is a positive sign that Australia Post recognises its value to our regions, as well as the significance of these communities to Australia Post's own revenue base. Moreover, it is encouraging that Australia Post is conscious of the importance of its role in supporting all regional, rural and remote communities across the country as our nation recovers from the COVID-19 pandemic.
10.47
The committee notes the recognition of this two-way relationship in the 2020 Deloitte report, as well as evidence given to this inquiry. It also notes the government's commitment to protect regional and rural CSOs in the temporary relief regulations.
10.48
The committee has concerns relating to delivery standards to regional and rural communities. Australia Post must ensure that these standards are being met for Australians living in regions, including regional centres.
10.49
The committee recommends that the Australian Government work with Australia Post, licensees, employees, contractor and worker representative organisations, and other stakeholders, to explore new ways to support the network of licensed post offices around Australia to benefit communities, particularly rural and regional communities.
10.50
The committee recommends that the Australian Government consider excluding regional capitals with a population of over 100 000 from the definition of 'metropolitan' in the regulatory relief and Alternative Delivery Model, should these regulations be extended.
10.51
The committee also has concerns regarding the adequacy of Australia Post's consultation practices. In introducing new policies, there appears to be a disjuncture between the recognition of the importance of regional and rural communities to Australia Post on one hand, and the development and implementation of policy on the other.
10.52
This failure is clearly evident in the recent perishable food handling ban debacle. Australia Post reversed this poorly conceived policy decision so soon after it was announced, following the considerable backlash from consumers, producers, and government stakeholders.
10.53
Australia Post has clearly recognised that it was an error to make these changes without adequate consultation. The committee notes in particular that the Acting CEO, Mr Boys, has undertaken to 'better understand what our customer capabilities and needs are and work hand-in-hand with regulators to determine where changes may be required' in the new industry working forum.
10.54
However, the committee considers it telling that Australia Post made this decision in the first place. Adequate consultation carried out before announcing a perishable goods handling ban would have told Australia Post that the policy would fail to meet the expectations and needs of Australian consumers, businesses and producers, many of who are based outside of city centres.
10.55
The committee is concerned that this is indicative of a more general failure of Australia Post's management to engage in appropriate consultation with stakeholders, including those from regional and rural communities.
10.56
The committee recommends that Australia Post improve its consultation arrangements with regional, rural and remote communities across Australia in the development of future policies and implementation plans.
Senator Sarah Hanson-Young
Chair