With Australia Post facing a major threat to its letters traffic from the National Broadband Network, the traditional postal service model in Australia will have to change. Australia Post will continue to try to increase direct mail volumes by promoting junk mail — the corporation is currently offering a course on “The Sweet Success of Direct Mail” to Tasmanian businesses — but that high-capacity outlet into every Australian home will provide a far quicker and more efficient delivery mechanism than anything Australia Post can offer for information-based communication.

Removal of Australia Post’s monopoly and privatisation might be one solution, freeing the corporation up to work out its future in a competitive market by itself, with a tender process for the universal service obligation component of Australia Post’s current monopoly. Given TNT was trading at an earnings multiple of around 8-9 prior to the financial crisis, a sale might fetch ~$5b for a Government anxious to get on the path back to budget surplus.

There are two problems with privatisation, though. One is that the Government has categorically ruled it out for Australia Post, in response to a question from Bob Brown last year.

The other is that there are unlikely to be any major efficiency gains available through privatisation. Australia Post has been a model example of corporatisation, in which public sector agencies are separated and run as independent businesses but not sold. Because the basic postage rate has been kept so low for so long, Australia Post has aggressively cut costs, keeping employee number below 35,000 for the last five years and having regular stoushes with the Communications Electrical and Plumbing and the public sector unions, all of which have been examined in micro-level detail by Labor senators in Estimates. It has also effectively outsourced most of its retail distribution network to licensees, who operate post offices as part of separate small businesses.

It is also debt-free, unlike its US counterpart — the US Postal Service is nearing $US10b in debt and has been added by the Government Accountability Office to the list of government agencies at high risk for financial failure. France’s La Poste, which has to deal with the looming deregulation of the European postal system, is €6 billion in debt. Australia Post also rates highly internationally for reliability which, given the population density of the country it serves, is an impressive feat.

The only benefit for the Government from privatisation, therefore, would be market’s assessment of the NPV of Australia Post’s earnings — which given the NBN may focus pretty much solely on the value of its highly competitive parcel distribution business.

Australia Post says that the death of mail has been predicted before — indeed, has been predicted since the arrival of the telephone, which it used to have responsibility for in the days of the PMG. But it wants to leverage off its distribution network and its regional presence to extend into other forms of service delivery, in effect extending the sort of role it plays with passport applications to other types of government services. As the only entity in the country with such an extensive “shopfront”, it argues it is best placed to deliver government services that still require some form of physical interaction.

It’s an approach that complements the developing thinking within the Commonwealth about greater coordination of services and a more “joined up” approach to service delivery. Such an approach had its origins in the regional transactions centres idea initiated by John Anderson as Regional Services Minister in the 1990s, many of which ended up being located in post offices.

To make a success of it, however, the corporation might have to end the perception that it treats its licensees (who form two-thirds of postal outlets) and the growing number of franchisees poorly, including the perception that it moves in itself if independent operators start generating high returns.

Australia Post has proven adept — in fact ruthless — at adjusting to its evolving market. It is already planning for life beyond mail.

Peter Fray

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