Australia’s government-owned post monopoly, Australia Post, unveiled its annual report yesterday, with the business reporting revenue of $4.5 billion (up from $4.32 billion last year) and net profit of $367.9 million (up a solid 7.8%). The improved result was spurred by a burgeoning parcels and logistics business, which boosted pre-tax profit by a stunning 24% to $220.5 million. The parcels and logistics business for the first time overtook the letters business and now accounts for 43% of EBIT.
As noted by the AFR, the parcels and logistics business consists of the domestic parcel business, Sai Cheng Logistics (a joint venture with China Post and Express Courier International) and Star Track Express (the business acquired from rich lister, Greg Poche).
While the Federal and various State Governments have been on a privatisation rampage in recent years, Australia Post remains a protected species. This much was observed by the AFR’s editorial yesterday, noting that there is “no appetite for selling Australia Post” in Canberra, and:
Privatising [Australia Post] would require revealing and justifying the subsidy involved in supporting a standard price letter service to rural customers. Add to that the inevitable dire warnings about country post office closures, and the cost to the coalition partners – the Nationals – is simply too high.
Australia Post’s logistics and retail operations act like a very well-run private company, albeit with a few monopoly privileges thrown in. At a minimum, there is absolutely no reason for keeping those businesses in public hands, while at the same time privatising water services, electricity distribution, electricity generation, many health services, and of course telecommunications.
Privatising the postal services is not a debate exclusive to Australia. Japan’s President Junichiro Koizumi dissolved the lower house of Japan’s Parliament and won a subsequent election primarily on the basis of privatising Japan’s postal service (which also provides banking and insurance products). Even the formerly communist Czech Republic has stated that Czech Post could be transformed into a private company by 2008.
The German Government privatised the giant Deutsch Post back in 2000. It is now the world’s leading logistics provider (under the DHL brand) and has earnings before interest and tax more than €3.7 billion.
Another successful mail privatisation occurred in the Netherlands, where KPN (the Dutch postal service) spun off its mail, express and logistics services in 1998. The group was later renamed TNT Post Group and is currently listed on the New York, Amsterdam, London and Frankfurt stock exchanges (the Netherlands government still holds 10% of TNT shares). Since privatising, the group has strongly expanded revenues and profits. Shares in TNT listed on the NYSE have increased from around US$25 in November 2005 to approximately $38 now.
When the Howard Government commenced selling Telstra way back in 1996, it noted the benefits that would emanate from the privatisation. These benefits included “better quality services and lower prices, the maximisation of economic efficiency, the avoidance of the conflict of interest that occurs when the Government sets the competitive framework for an industry while owning one of the major players [and] economic benefits associated with the reduction of government debt and associated interest payments. “
The question must be asked – if the Australian people benefit from Telstra being privately owned and more efficiently managed, why should Australians not also benefit Australia Post being privately owned, efficiently managed and exposed to competitive pressures?