2023 COMMERCIAL: AUSPOST LOSES $384M

Australia Post lost more than a million dollars a day, every day, of the last financial year on its Letters business, racking up losses 50 per cent greater than the previous year.

AusPost will now be pushing for higher stamp costs, and a reduced delivery schedule, in a bid to stop it haemorrhaging taxpayer cash, with its managing director Paul Graham saying price increases are needed to address what the monopoly forecasts will be increasing losses.

AusPost has requested increases in the price of stamps above and beyond inflation, and wants to delete the regulation that says it cannot charge business more than households for the price of a stamp. Today almost all letters, some 97 per cent, come from business. It also wants to stop every day delivery.

Total losses from Australia Post's Letters business skyrocketed to $384m, dragging the entity into its first overall loss for eight years, and only the second loss since it became a became a self-funded Government Business Enterprise, in 1989. Its 2023 result saw it plunge to $200m in the red, from a $55m profit in the previous financial year.

Signalling the government’s intentions, Michelle Rowland, minister for communications, said, "Today’s results show that the company faces significant structural headwinds, from changing consumer trends to growing digitisation. Change will be needed to ensure that a high quality and sustainable letters and parcels service is maintained."

PVCA* has been on the front foot for the print and mail industry, forming a Mail Industry Coalition in March on the back of AusPost's half year figures. That Coalition has since been engaging with AusPost. Kellie Northwood, CEO of PVCA said, "In April the PVCA submitted our position across the opportunities for the modernisation of the postal service across Australia. We await response from the Minister and Department across this consultation.

"Our suggestions and considerations included in our submission into the consultation were developed over many weeks and discussion with the Mail Industry Coalition. The Coalition included some 30 businesses across the sector and provided significant insights into how Australia Post could gain operational efficiencies, engage with meaning with industry stakeholders and promote the business mail sector for customer insights and ongoing investment.

"The latest results from Australia Post reflect reforms are needed, and we urge the government to provide responsive support to the postal service consultation and allow Australia Post, industry and stakeholders to develop a progressive strategy for a strong sustainable letter business well into the future."

Revenue at Australia Post was steady overall at $8.97bn, indicating mounting operational costs were responsible for the dive into the red. Parcels and services account for $7.3bn worth of the total, up by 0.9 per cent on the previous year, which AusPost said was achieved against "fierce" competition from rival parcel delivery outfits.

Letters continued to decline with volumes down 7.8 per cent from last year, despite an increase in business-related letters, including consecutive interest rate rises and data breach notifications. Today the average Australian household receives only 2.2 addressed letters each week, down from 8.5 each week 15 years ago, and this is expected to almost halve in the next five years. As letters losses continue to increase, it is expected the estimated cost for Australia Post to deliver in line with its Community Service Obligations will also continue to increase.

Australia Post says the delivery frequency of letters remains one of the most significant costs to the business and working in conjunction with the Communications Workers Union, this year it trialled a new delivery model in Hornsby NSW, which will be expanded to other locations in FY24. Under the trial, non-priority letters were delivered on alternate days.

Paul Graham said, "Given our trajectory, we are responsibly addressing the financial challenges of the business. This includes putting in place the right organisational structure to support our frontline, simplifying our operations, ensuring we have an effective retail footprint and reviewing our pricing to address increasing losses across our Letters business.

"We now have a distinct two-speed business, with our Letters business weighing heavily on our eCommerce-driven Parcels business, retail and other services.”

This financial year saw a marked increase in the estimated cost to deliver Australia Post's Community Service Obligations to $442m, up 27 per cent from FY22. AusPost also signalled it wanted to creview the viakility of many of the country's Post Offices.

*The PVCA is now rebranded as the Visual Media Association (VMA).