Getting Australia Post out of the red

by John Carmody on 19 June 2014 · 1 comment

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.

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{ 1 comment… read it below or add one }

1 Plunko June 25, 2014 at 9:57 pm

Seems to me the AP management are a useless parcel of the proverbial who need to be certified. Thinking outside the envelope, stamping out dead letter issues, charging a bit more for stamps, posting better returns,
and a bit less dreaming through the cellophane window, and we’ll have the problem licked!

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