Australia Post wants to increase its stamp prices amid losses – will it stick?

Australia Post has announced it will notify the Australian Competition and Consumer Commission tomorrow of its proposal to increase its basic postage stamp price from 60 to 70 cents.

It wants to keep stamps at a concession rate of 60 cents for 5.7 million people with a Commonwealth Government issued concession card, until 2017. It proposes the new stamp cost will come into effect on March 31 this year.

Australia Post said the price increase will be delivered as additional payments to Licensed Post Office operators.

Australia Post managing director and chief executive Ahmed Fahour said the “current stamp price no longer reflects the true cost of delivering each letter and stamp price increases have not kept up with inflation”.

He said it was a “reluctant” but “necessary” move.

“This 10 cent increase will allow us to partially offset the growing losses that we are seeing in our letters business. At 70 cents the Australian domestic stamp will remain among one of the lowest prices in the OECD,” he said.

Post Office Agents Association Limited chief executive Ian Kerr told SmartCompany that “in principle, POAAL supports Australia Post’s proposal to increase the basic stamp price from 60 to 70 cents”.

Kerr says it will be beneficial for its members as it is linked to multiple additional payments they receive, and it will benefit them in terms of commission, as “they will get a greater commission on a 70 cent stamp than a 60 cent stamp”.

He says the organisation is not yet prepared to support the concession price stamp, as they want more details from Australia Post on how this will be monitored and transacted.

Kerr wants to ensure there is “no capacity to exploit the concession stamp price”, for example, with a business asking a concession card holder to buy stamps in bulk at the cheaper price.

He’d like to know what limits there will be on the number of concession stamps a customer can buy at a time.

Kerr says the POAAL will highlight these potential issues in a submission to the ACCC.

Australia Post said it had only increased the basic postal rate three times in a 22-year period, with the last increase in 2010.

It said the basic price of a stamp in that time frame has increased 33%, from 45 to 60 cents. However, the Consumer Price Index has gone up by more than 70% and most of its operating costs by over 100%.

Australia Post said that due to falling letter volumes, it made a loss of $218 million in its regulated mail business in the 2012-13 financial year. Its domestic mail business lost $147 million, following a loss of $114 million in the previous year.

It reported that letter volumes were down 6.4% to 231 million in 2012-13, part of a decline of around one billion items over the past five years. In 2007-08 letter volumes were around 4.6 billion, and the previous financial year they were at 3.6 billion. It delivers to 11.2 million addresses nationally.

“As more and more Australians communicate and transact online, letter volumes continue to decline at a rapid rate. Today, the average number of letters delivered per letterbox each day is 1.5, down from 2.0 in 2008 and a decrease of 25%. This is a consistent trend all around the world,” Fahour said.

The move follows debate about privatising the service – a suggestion which franchisees were largely against.

Australia Post also came under fire in late 2013 with some of its franchisees threatening to sue over cost increases in parcel deliveries.

At the time, Licensed Post Office Group spokeswoman Angela Cramp told SmartCompany more than 500 franchisees would fight for changes to the way Australia Post reimburses its 2895 franchisees for handling parcels.

Franchisees are paid 29 cents a parcel under a pricing structure in place since 1993, said Cramp, and under the newer scheme will be reimbursed 22 cents extra. But she said the barriers to claiming the extra reimbursement were too high, as it only applied to certain contractors with hand-held scanners.