AUSPOST AIMS FOR MAJOR PRICE HIKES

Australia Post is proposing to increase Business Mail pricing to increase by a Volume Weighted Average (VWA) increase of 20.6 per cent, from January, as it seeks to stem huge losses in its Letters business.

The Print Post category, used extensively by the print and mail industry, including for magazine distribution, is included in 20.6 per cent proposal, as is Pre Sort. However, two of the other main rates used by the print and mail industry, Promo Post and Charity Mail, will see smaller increases, of 5.2 per cent and 3.4 per cent respectfully. The proposals are now with the ACCC for consideration.

AusPost wants to raise the price of ordinary mail by even more, it is seeking a 25 per cent rise. This change would increase the price of delivering reserved ordinary small letters from $1.20 to $1.50, ordinary large letters up to 125 grams from $2.40 to $3.00, and ordinary large letters between 125 grams and 250 grams from $3.60 to $4.50.

AusPost lost $384m on its Letters business in the financial year ended 30 June, dragging the entire entity into the red to the tune of $200m, only the second time since it was structured into its present form in 1989 that it made a loss. Both its CEO Paul Graham, and the federal minster for communications, Michelle Rowland, have said major changes are needed.

The proposed increases, among the biggest in Australia Post’s history, were revealed by the ACCC, which is now considering them, and asking for submissions, before it makes its decision.

PVCA will be making a submission. Its CEO Kellie Northwood said, "The announcement from the ACCC is challenging for the industry and the detail to each product must be reviewed carefully to ensure we understand the total impact to the industry and our members. The volume weighted average announcement of 20.6 per cent can be misleading, and we are working through the ranges, sizes and weights now to ensure we can best advise our members. The ranges are from 1.5 per cent to 25 per cent, which is a significant breadth."

Northwood said that while Promo and Charity would be seeing only relatively small increases, Pre Sort and Print Post would be under pressure. She said, “The majority of PVCA’s members lodge Business Mail, on behalf of their clients, under the two products exempted under the weighted average increase of 20.6 per cent, Promo and Charity, however, the PreSort product carries the largest volume across Business Mail, and as an industry we must ensure our focus on promoting the credentials of mail across identity theft, security, social inclusivity and responsiveness for the essential communications sector is prioritised, to ensure the largest mail volume sector can withstand the proposed increase and ensure the channel continues to deliver a strong Return on Marketing (and Communications) Investment.

"If we fail to communicate to the Banks, Telcos, Government and Utilities of the ROMI of mail, the 20.6 per cent price increases is expected to lead to volume declines, which will impact all mail products,” said Northwood.

“The second largest mail product impacted for our members is across Print Post and the Association is considering how this channel can build incentives across incremental volumes or other value-add services to mitigate the increase. Many publishers are small businesses, operating single mastheads for community publications and networks, while the mainstream publications are reliant upon larger advertising benefits; it is the smaller publishers who will be most likely impacted and therefore will need consideration in our communications into the ACCC, Australia Post and the Minister,” said Northwood.

PVCA set up a Mail Industry Coalition back in March, and communicated to AusPost on modernisation, but has been left in the dark since then. Northwood said, "We urge the Minister and the department to expedite the consultation on the Modernisation of Postal Services. Since the consultation was issued in March and submissions provided in April there has been very little movement of communication from the department, which is deeply disappointing. Reforms are needed to modernise the postal service and ensure neither businesses, nor industry, are carrying the burden of outdated regulations impacting the operational efficiencies and, therefore, economies of Australia Post.” 

When assessing the proposed price increase, the ACCC will consider Australia Post's recovery of efficient costs, including a reasonable rate of return, and how the company's common costs are allocated to the relevant letter segments. In forming its view, the ACCC will consider the responses received during this consultation period.

Australia Post has set out the reasons for its proposed price increase in its draft price notification and supporting materials.

"We would like to hear from consumers, businesses and other stakeholders about their views on Australia Post's proposed price increase," ACCC Commissioner Anna Brakey said.

"We will then examine the information provided by Australia Post and the feedback received in the context of our role under the legislation."