Monthly Archives: June 2014

Getting Australia Post out of the red

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John Carmody returns to the Mule in his promised second guest post and takes a close look at Australia Post’s profitability with some (ahem) back-of-the-envelope calculations.

There are many forms of communication which underpin the function and productivity of a modern society like Australia. Despite the Cassandra-commentary from Mr Ahmed Fahour (the well-paid CEO of Australia Post), regular mail delivery certainly remains one of them.

In making his tendentious, but opaque, points, he has not been entirely frank with the community. He has, for instance, claimed that 99% of our mail is electronic. That assertion is meaningless because so much e-mail is advertising, brief inter- or intra-office memos and notices, or quick substitutes for telephone calls. When these are removed from the calculation, the importance of “hard mail” becomes more obvious

The data which the Herald has published (for instance, “Please Mr Postman: snail mail doomed to disappear“, 14 June) also show how shallow or formulaic Mr Fahour’s thinking seems to be. In 2012-13 Australia Post made an after-tax profit of $312 million and if there had been no losses on the handling of letters, that would have been $530 million. Do Australians really want a profit of that magnitude from such a vital national service?

But when one looks at that “letter-loss” a little more closely and at the figure of 3.6 billion letters delivered that year, it is clear that the loss per letter was 6.5 cents. In other words, if instead of recently increasing the cost of a standard letter to 70 cents, this had been to 75 cents, the losses would have been comprehensively dealt with.

Some comparisons might be informative. The British Royal Mail currently charges about $A1.10 for delivery of a standard (20g) letter for next-day delivery within the UK (its “aim”) and $A0.95 if you’re happy for delivery within 3 days. The Deutsche Post charges the equivalent of 86 Australian cents for delivery within Germany but about $A1.08 cents to adjacent France. Given that we currently pay only 70 cents for delivery across a far larger area, my suggested price of 75 cents seems reasonable and justified.

The government’s medical fairyland

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For the first time in a while, John Carmody returns to the Stubborn Mule with the first of two guest posts. He argues that the government’s proposed medical “co-payments” do not add up.

The government continues to flounder about many details of its budget and part of the reason is a lack of stated clarity about its intentions (although the electors are drawing their own conclusions about those intentions and whether they are fair and honest). The proposed $7 “co-payment” for GP visits is an example of this lack of frankness.

On the one hand, the Government – purporting to be concerned about an excessive patronage of GPs – seems to want us to visit our doctors less frequently than the 6 visits which every man, woman and child currently makes each year (i.e. about once in two months for all of us, an internationally comparable figure, incidentally) . On the other hand, it has, so to speak, attempted to sugar-coat this unpleasant pill by promising that, while a little of that fee will go to the practitioners, most of it will go into a special fund (to be built up to $20 billion over the next 6 years) to boost medical research (and thereby do us all a great deal of good). Neither claim survives scrutiny.

The $2 proposed share to GPs will not compensate them for the extra administrative costs which they will have to carry on behalf of the Government; nor will that nugatory sum compensate for the progressive tightening of the reimbursement of doctors from “Medicare”; so the Government’s share will, to be realistic, need to be significantly less than $5. After dealing with its own extra administrative costs, therefore, the Government will probably only be able to put $3-4 per GP consultation into the proposed research fund. To build that fund up to the $20 billion proposed will require every Australian to visit the GP about 50 times each year – once each week. How this is going to reduce our alleged “overuse” of medical services has not been explained. Nor has how, in practice, it can be achieved. The Government is living in Fairyland.