Australia Post has asked to raise its prices by 10 per cent on ordinary letters — well above Australia’s current inflation rate of 1.6 per cent.
That would take the price to $1.10 for a standard small letter, up from its current $1. A similar percentage increase is also being sought for larger ordinary letters, which would take the cost to $2.20 for large letters up to 125g in weight and $3.30 for letters weighing up to 250g.
However, it is not proposing to increase prices on other services it offers. Australia Post plans to keep the cost of priority labels steady at 50 cents, while concession stamps and Christmas stamps would also remain at their current prices — 60 cents and 65 cents, respectively.
The proposed price changes were sent to the competition regulator on 1 August, with the ACCC revealing the plans in a public statement on Wednesday (7 August).
“In assessing these proposed price increases, we will consider various issues including trends in the postal industry and whether Australia Post has adequately explored efficiency improvements before increasing its letter prices,” said ACCC commissioner Cristina Cifuentes.
“We will welcome submissions on this proposal and will take into account the views of industry stakeholders, consumers and Australia Post itself.”
The ACCC noted that it does not have the power to approve pricing changes by Australia Post, but that under the Competition and Consumer Act 2010, it is required to review any proposed increases and then determine whether to lodge any objections.
As the competition watchdog noted, “Australia Post can only vary the rates of postage for ordinary letters if the minister does not disapprove it”.
If given the green light, the price changes would take effect from January 2020.
Estimated impact of price rises
In a covering letter to the ACCC accompanying the proposal, Australia Post’s group CEO and managing director, Christine Holgate, said the average household would typically pay up to $2 more each year to send ordinary letters.
“For the Australian household that is ineligible for the concession stamp offer, the average cost impact of the 10 cent price increase will be between $1 and $2 per annum (assuming that most Australian households send between 10 and 20 letters per year),” Ms Holgate wrote.
“However, as we are also proposing to hold the seasonal greeting card rate at just 65 cents, and we estimate that around 30 per cent of the 10 to 20 letters sent per year are seasonal greeting cards, the impact reduces to between $0.70 and $1.40 per household.”
Ms Holgate said that the proposed prices had been modelled over the 2019 to 2022 financial years, and that the carrier “believes the proposed prices will result in revenue below the maximum allowable revenue calculated under the ACCC’s Post Tax Revenue Mode”.
“Australia Post remains very conscious of our responsibility to maintain an accessible and affordable letters service for all Australians,” she said.
Australia Post also said that even at the higher price of $1.10, the cost to Australian consumers of posting a standard letter remains “one of the most affordable in the world”.
Pricing for larger business customers
In its proposal to the ACCC, Australia Post noted that “business and government customers have been very clear they want more transparency and predictability around price changes. Providing notice, or at a minimum guidance, of future price changes allows customers to plan for changes financially and minimise disruption.”
As such, the postal service said that it has committed to imposing a single price increase for business letter services each financial year.
Under this commitment, Australia Post has said that it will give “major customers and industry” three months’ notice of any pricing changes, and that price guidance for the following year would be provided “as soon as is practically possible”.
Small businesses back price rise
Following public release of Australia’s Post proposal, the Post Office Agents Association Limited (POAAL) – which represents small businesses operating in the postal sector, including licensed owner-operators of post offices as well as mail contractors and associated businesses – subsequently issued a statement claiming that price increases are needed.
“It is important that Australia Post’s letters service is sustainable,” the association’s director, Bob Chizzoniti, said.
“The letters service should be self-funding, and not dependent on cross-subsidies from other parts of Australia Post’s operations, such as parcels.”
Mr Chizzoniti said that Australia Post is “obliged to deliver letters at a uniform rate”, but that costs have risen since the last increase in January 2016, at the same time the letter volumes are continuing to fall.
He suggested that the higher price still “represents good value for money”.
“No other carrier delivers the length and breadth of Australia – and certainly not for such a low price.”
Alternative would be to cut delivery services
According to the POAAL, part of the cost premium facing Australia Post is the ever-increasing number of homes to which the carrier must deliver, as population continues to grow.
It said that aside from increasing its prices, Australia post has “two main alternatives”, both of which involve reduced services.
“Letter delivery could move from five days per week to alternate day delivery, or to-door letter delivery could be replaced with delivery to community mailboxes,” it suggested.
“These letter delivery options have been implemented in other countries in response to falling letter volumes and growing delivery costs.”