ALP Senators' Report
SUMMARY
AUSTRALIA POST HAS A UNIQUE ROLE IN OUR
COMMUNITY
-
Labor Senators recognise that Australia Post is a critical part
of Australia’s communications infrastructure, and plays a unique role in
ensuring that Australians everywhere have access to a quality, reliable postal
service.
- Labor Senators believe that Australia Post must be able to
continue and extend its unique role in the emerging digital age.
THE GOVERNMENT’S DEREGULATION PROPOSALS
- Labor Senators are opposed to both the scope and scale of the
Government’s proposed deregulation of Australia’s postal environment.
- Labor Senators believe that deregulation on the scale proposed by
the Government can only lead to an increased focus by postal operators on
profitable areas, with a corresponding decline of services or increase in the
costs of non-reserve services in marginal areas, such as remote, rural and
regional Australia.
-
Labor Senators oppose the Government’s proposed deregulatory
changes on the basis that these changes would significantly reduce the capacity
for Australia Post to provide existing and potential future communications
services.
POSTAL NETWORK ACCESS
- Labor Senators believe that an appropriate postal network access
regime can be part of a healthy competitive industry.
- Labor Senators, however, believe that this must not be to the
detriment of universal access to reliable and dependable postal service
standards.
AUSTRALIA
POST IS AN IMPORTANT PART OF OUR NATIONAL COMMUNICATIONS INFRASTRUCTURE
Postal
services are a necessary part of social and economic life. These services
constitute the common act of carriage of messages, documents and objects from
one point to another.
Australia
Post is clearly committed to fulfilling that service, as reflected by Australia
Post’s corporate vision, which states in part:
Australia
Post is committed to providing high quality mail and parcel services to all
Australians.
We will meet our customers’ changing needs by providing:
- innovative and easy-to-use products and services;
- friendly service by knowledgeable staff;
- consistent on-time delivery;
- value for money; and
- modern, efficient networks.
(Australia Post corporate vision –
http://www.austpost.com.au/)
The 21st
century may well be dominated by those who can access and harness information,
communications and intellectual property. If Australia is to generate high
skill, high wage jobs for the future, then we must invest in the infrastructure
of the knowledge based industries – our information and communications
infrastructure.
Across
Australia, communities use the services provided by Australia Post to undertake
many activities that we daily take for granted, and, according to most
accounts, Australia Post provides these services efficiently and effectively.
Australia Post is generally regarded by our constituents as providing a
good postal service. We get remarkably few complaints from our constituents
compared with some other communications modes.
(National
Farmers Federation – ECITA Committee Hearings 8th May 2000)
Australia
Post is a public sector organisation, incorporated under legislation, the
Australian Postal Corporation Act (1989). Australia Post plays an important
role in communications infrastructure. It maintains a national addressing and
delivery system for the transportation of physical mail articles, thus
providing a universally accessible, reliable public carriage network for
carrying mail and parcels. This historic role is also viewed with respect,
particularly by those who live in rural and regional areas.
The National Farmer’s Federation see postal services as one of the
essential services or rights that people have in Australia and that everybody
should have the right to have reasonable access at a reasonable price to postal
services.
Australia Post provide not only a good postal service but also additional
services, which are obviously important to people in rural and regional
Australia.
(National
Farmers Federation – ECITA Committee Hearings 8th May 2000)
- Labor Senators recognise that Australia Post is a critical
part of Australia’s communications infrastructure, and plays a unique role in
ensuring that Australians everywhere have access to a quality, reliable postal
service.
AUSTRALIA POST
HAS AN IMPORTANT TASK FOR THE FUTURE AS WELL AS THE PRESENT
As the
global economy moves from an era in which trade in physical resources was the
prime generator of wealth to an era where trade in services and ideas grow to
dominate business, the basis for national investment in the relevant
infrastructure supporting services and ideas must also change.
The scope of
Australia Post’s current postal infrastructure is vast, consisting of public
postal outlets, freight logistics, mail sorting procedures, electronic networks
and a massive national vehicle fleet.
The nature
of this infrastructure is subject to change, as global developments in digital
communications and information technology transform the way we communicate,
transact and interact.
Providing
world class delivery standards in the face of increasing mail volumes has
necessitated change to our mail network. That transformation is known as
FuturePOST.
This massive modernisation and upgrade of the mail network will ensure that
mail remains a relevant and cost effective communication channel well into the
next century.
(Australia Post’s FuturePOST minisite
– http://www.austpost.com.au/)
In
Australia, public access to the infrastructure of this emerging digital world
will be just as vital for communities as access to the Australian public postal
network has been for over a century.
- Labor Senators believe that Australia Post must be able to
carry on its unique role in the emerging digital age.
AUSTRALIA
POST PROVIDES THE CRITICAL INFRASTRUCTURE FOR BRIDGING THE COMMUNICATIONS GAP
BETWEEN CITY AND RURAL AUSTRALIA
Australia
Post operates an extensive network of publicly accessible service outlets in
communities throughout Australia.
Significantly,
these outlets are also spread relatively equitably across rural and regional
Australia, a result of Australia Post’s historic national role.
The
potentially damaging consequences that the Government’s postal deregulation
proposals may have on Australia Post could jeopardise its role in the delivery
of emerging digital services in rural and regional communities, and will risk
increasing the disparity in respect of the cost of and access to communications
infrastructure.
It is feared that rural and
remote people would not receive full service in a competitive market, or costs
could increase substantially and lead to a most inequitable situation
(Country Women’s Association of
Western Australia – Submission no. 2)
Of
particular concern for those in rural or regional areas is the possibility that
in a deregulated environment such as that proposed by the Government, Australia
Post might have to consider basing the prices of non-reserve postal services on
a differential basis, that is, charging more for services in rural or remote
areas than for those in more profitable urban areas.
We would have to review the market impact, of course, over time and see
how our profitability was going to see whether some price differential in
competitive non-reserve areas was warranted or not...
Where it might impact is on the small parcels where we do have a
universal price. You can send a 250-gram parcel anywhere in Australia for
$2.50. In very remote areas, obviously with $2.50 we lose; there is
cross-subsidisation within that. We may need to review the very small parcels.
(Australia
Post – ECITA Committee Hearings 8th May 2000)
Clearly,
differentiated pricing would put users of mail services in rural and remote
areas at great disadvantage.
While the
claim has consistently been made by the Government that services in rural and
regional areas will not be affected by the introduction of the proposed
legislation, even the Government is unsure about the impact on Australia Post
of some aspects of its deregulation Bill, stating in the Explanatory Memorandum
to the Bill that:
It is not possible to quantify
with certainty the benefits and costs from reduction in the reserved services
and the postal access regime
(Page 3 – Postal Services
Legislation Amendment Bill 2000 – explanatory memorandum)
Others are
not so optimistic as the Government. Of particular concern is the potential
impact of the legislation on licensed postal office operators. The Post Office
Agents Association Ltd (POAAL) have stated that:
Government wants to change the
rules and slash their (postal agents) investments in the business and the
community.
Any legislation which changes the
current situation will have an adverse impact on the businesses of licences and
mail contractors – and could see them bankrupted, which would not be good news
to their communities...
(Post Office Agents Association Ltd
– Submission no. 15)
- Labor Senators believe that maintaining Australia Post as a
robust local presence in regional areas for the delivery of both existing and
emerging services will help to bridge the growing communications divide that
exists between rural and urban communities.
NO PUBLIC
BENEFIT IN WHOLESALE DEREGULATION
Labor is
opposed to both the scope and scale of the Government’s proposed deregulation
of Australia’s postal environment.
These proposals come at a time of economic
uncertainty for Australia Post, as economic change is accelerated by rapidly
developing information technology.
So-called old economy industries are making way
for media and technology markets, as international trade in services and
information accelerates. This transition is placing pressure on traditional
service sectors, including that of the postal sector, as competition to provide
both existing and emerging services increases.
Indeed, Australia Post will be placed under even
greater pressure after the introduction of the goods and services tax in July
of this year. Australia Post estimate that the adverse impact on the
profitability of the organisation will be approximately $90million to
$100million, reducing profit on the last financial year by approximately 26%.
Mr G. Ryan—We
estimate that loss of revenue—Mr Short may want to add to this—is around $90
million to $100 million per annum.
Senator MARK BISHOP—So
you are saying that the impact of the GST on Australia Post—subsequent to July
98—is revenue loss of $90 million to $100 million.
Mr Short—That is
correct.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
As well, in total, the postal competition changes
proposed by the Government, including the introduction of an access regime,
will result in a further decline in Australia Post’s profits, estimated by
Australia Post to be around $200million. This figure represents over half of
Australia Post’s total profit for the last financial year.
Mr Short—In revenue
terms, we think the loss purely from competition will be around $160 million.
We think the effect of aggregation will add another $40 million to that, so in
total it will be about $200 million.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
This figure,
when combined with the estimated $90million to $100million impact of the
introduction of the goods and services tax, means that Australia Post’s profit
would decline by over $290million if the Government’s proposals go ahead. When
compared to Australia Post’s record 1998-99 financial year profit of
$370million, this would leave less than $80million for Australia Post to
re-invest in infrastructure, or to subsidise service obligations.
Australia Post have stated that the erosion of
the organisation's profit necessarily means a reduction in investment in the
postal network infrastructure, again placing services and, ultimately, prices,
at risk.
We have provided substantial financial returns to our owner—around $4
billion—and we have been able to reinvest about $2.3 billion over the past 10
years to remain at the forefront of postal performance, and that ability to
reinvest will be crucial to our future as well.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
Clearly, the
erosion of Australia Post’s prfits will have two immediate effects. Firstly,
Australia Post will have less profit to re-invest in its own postal network
infrastructure, and secondly, the company will return less by way of dividend
to the Commonwealth.
The Government has not provided quantitative data
about the potential risks and benefits of its proposals. The National Farmers
Federation stated in their submission to the inquiry that:
At a time of high compliance burdens with taxation reform, combined with
a loss of services in regional Australia in a range of areas and changes in
telecommunications service provision, the implications of any new reform...must
be carefully considered and communicated.
(National
Farmers Federation – ECITA Committee Hearings 8th May 2000)
Labor Senators support the maintenance of the
existing reserved service postal regulations and the continued development of
Australia Post’s robust national postal and communications infrastructure in
the existing competitive environment, on the basis that this will guarantee
universal communications services now and for the future.
Labor
Senators believe that deregulation on the scale proposed by the Government can
only lead to an increased focus by postal operators on profitable areas, with a
corresponding decline of services or increase in prices in marginal areas, such
as remote and rural Australia.
This view is
echoed by a range of organisations.
Ms Nicholl—Our
organisation is concerned that if deregulation occurs, prices for services may
fall in the high volume areas but will increase in the lower density and remote
areas. As many of our members live in rural and remote areas, this would be a
concern.
(Country
Women’s Association of Western Australia – ECITA Committee Hearings 8th
May 2000)
Australia
Post’s already efficient business practices have meant that it has been
recognised internationally, and consistently ranks highly in comparisons of
cost efficiency, despite operating in a competitive environment. (See appendix
1 – graphs relating to Australian postal pricing and protection compared to
other OECD countries)
When asked
about the cost efficiency of Australia Post’s pricing for standard letter
articles, Australia Post provided the following comparisons:
Mr G. Ryan—I do
have a few that might be of interest. The basic postage rate in Sweden is fully
deregulated - this is on a purchasing parity basis - at 68c, remembering that
ours is 45c. In Finland where it is fully deregulated the rate is 68c. In
Germany the rate is 75c. In Holland the rate is 52c.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
Viewed in this light, it is difficult to see how
further deregulation of reserved services could provide much in the way of
appropriate price falls. Any change to pricing would simply come off Australia
Post’s profit margin, thereby reducing Post’s capacity to re-invest in
infrastructure, and return a dividend to the Commonwealth for use in other
areas.
Australia Post are of the view that the
Government’s proposals go further than their own plans to open the postal
sector to more further competition.
There have been areas of difference between our originally preferred
proposals and the final provisions that are in the bill. They relate to the
reserve service weight threshold of 50 grams—we had proposed 125 grams—the
deregulation of incoming international mail—we had opposed that—and a proposed
access regime which we felt goes further than necessary.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
While recognising Australia Post’s concerns,
Labor Senator do recognise that an appropriate third-party access measure in
the existing competitive framework could minimise unnecessary duplication of
material infrastructure.
Labor
Senators believe that an appropriate postal network access regime can be a part
of a healthy competitive industry. This, however, must not be to the detriment
of the notion of universal access to reliable and dependable postal service
standards.
Australia
Post have made it clear that uncertainty surrounding the potential impact of
the proposed access regime is a factor of some concern.
There will be some reduction in revenues and profit, inevitably, compared
with the no-change scenario. We have said, however, that the access regime is a
little unclear as to its final outcome because we will not know until a case is
taken to the ACCC.
(Australia Post - ERCITA Committee
hearings – 8th May 2000)
Clearly,
then, the Bill represents two major unknowns. Firstly, the Government cannot
predict the risks or benefits associated with further deregulation, and
secondly, there will be an unknown risk to Australia Post, and therefore their
capacity to re-invest in infrastructure and provide a dividend to the
Commonwealth.
- Labor Senators oppose the Government’s proposed
deregulatory changes on the basis that these changes would significantly reduce
the capacity for Australia Post to provide existing and potential future
communications services.
Senator Mark Bishop
Senator for WA
___________________________ |
Senator the Hon Nick Bolkus
Senator for SA
_________________________ |
![Standard Letter Prices in OECD Countries Comparison using A$ PPP Rates](e04_1.gif)
![Postal Monopolies in OECD Countries Weight Protection Levels (where known).](e04_2.gif)
Note: USA
has exclusive rights over all mail delivered into letter boxes – of
unlimited weight – save for some specified urgent mail.
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