I have a piece available at the Online Opinion website (a great repository of Australian e-journalism for well over a decade now, founded by Graham Young) about the prospect of privatising Australia Post.
A transcript of the piece is available over the fold for those interested.
The Gillard government has urged states to sell their electricity assets, but at the same time has left privatisation of its own assets off the reform table.
While the general public impression may be that all the federal government’s ‘family silver’ has been sold off, the privatisation lull since the early 2000s has meant some entities which would be more efficiently operated in private hands remain firmly under government control.
One of the remaining candidates for privatisation is Australia Post.
In similar fashion to government postal services in other countries, Australia Post is being squeezed in regard to both the revenue and cost aspects of its operations.
Technological developments such as the internet and mobile phones have meant that the use of letters as a mode of communication has waned significantly, eating away at a traditional source of revenue for Australia Post.
The latest figures show that Australia Post has lost about $91 million through the exclusive ‘reserve service’ requirement imposed by the government to deliver letters within Australia and from overseas to Australian addresses.
The organisation is also labour intensive, which is not altogether surprising given another regulatory requirement by government that it physically provides weekday deliveries to most Australians, and maintains 4,000-odd postal outlets including a mandatory share in rural and regional areas.
But with its highly unionised workforce prone to strike action opportunities to use labour-saving technologies, such as vending machines for standard letters or Express Post envelopes, have not been fully exploited.
Australia Post appears to be holding its own in the competitive market for parcel deliveries, thanks to a boom in online retailing not of its own making, however its responses to the fall in letters have starkly illustrated that it remains an inefficient, unresponsive government entity.
Very soon Australia Post will party like it’s 1996 because it will launch, wait for it, a ‘Digital Mailbox’ service in which people receive email, pay bills and store documents in one online location.
Even those with a cursory knowledge of the internet know that Hotmail (which was launched in 1996), banks, telephone companies and other private concerns already provide such services, raising questions about the inherent wisdom of a government-owned entity duplicating that which already exists.
There has also been speculation in recent years that Australia Post wish to move more deeply into the financial services arena, a field in which governments in the past have had poor management records.
Australia is grouped together with a small cohort of countries that have engaged in partial liberalisation of postal services during the 1980s and 1990s.
In 1989 the Hawke government enacted the Australian Postal Corporation Act, which ‘corporatised’ Australia Post entailing that the organisation would be subject to general taxation and regulatory requirements similar to those facing private sector businesses.
The objective of corporation was to improve Australia Post’s efficiency by enforcing it to act ‘as if’ it were a private entity whilst remaining under government ownership, with the Communications Minister being Australia Post’s sole ‘shareholder.’
The Act, and subsequent legislative developments, reduced the degree of exclusive monopoly rights held by Australia Post in the distribution of heavy-weight letters and parcels helping to enhance the growth of private courier services.
These measures were steps in the right direction, however other countries have proceeded further down the road of postal services liberalisation.
In countries such as Germany, Malaysia and the Netherlands the government post offices have been either partially or completely privatised, mainly through the public offerings of shares.
The monopolistic rights accorded to government post operators to carry letters have also been abolished entirely in several countries, including Germany, New Zealand and Sweden.
Australia should follow the path of the postal reform pathbreakers to improve the efficiency of the presently government – owned postal carrier, and deepen postal and courier services markets.
At the very least Australia Post should be fully privatised, and could be expected to perform effectively as a private operator given that it has existed for almost a quarter – century on the ‘training wheels’ of corporatisation.
What of the community service obligations applicable to the carriage of letters and physical services accessibility?
One option could be that the government sell off the rights to a bidding company to deliver the CSO arrangements for a fixed term on a least cost basis.
However in a country characterised by ever – increasing access to internet services, such as email and online bill paying facilities, and greater private sector competition there is a case to further liberalise the regulatory requirements entailed under the CSO.
About a decade ago the Howard government proposed that private companies could charge market rates for the delivery of letters weighing between 50 and 250 grams, a reform not implemented due to political considerations.
The government’s ‘no privatisation’ stance is lamentable, as it deprives consumers of the potential benefits provided by the realisation of private sector efficiencies.
And in the short term to not privatise government assets also deprives the government of financing options to plug its yawning budget deficit gap.
But with the radical innovations witnessed in communications markets over the last two decades, no sound rationale remains for the government provision of increasingly antiquated letter and small parcel postal services.
There is still some lucrative low hanging fruit of prospective privatisation ripe to pick; it is time for the government to pick it.
Totally overdue. This is a 1980s/1990′s style reform that somehow slipped through the cracks and never got done. It’s easy, low-hanging fruit.
There’s a reason why Fedex has such a small footprint in Australia. They’re literally not allowed to compete with Australia Post. If you reduce the monopoly power Then private operators will be able to offer competitive alternatives.
And Australia post exploits their monopoly power with shopfronts that sell all kinds of stuff that have nothing to do with postage. I’ve seen everything from soccer balls to teddy bears and romance books in there. It’s not the role of government to be running shops that sell romance paperbacks.
Great, now write a case for the privatisation of the ABC.
Dd… You don’t seem to know anything about Australia post. My personaly understanding is: The monopoly is only on letters under 250g – on which Australia post loses money. The retail and parcel operations and all other services are free market open to competition and run at profit. So I am of sure how they are exploiting there monopoly. Maybe what you said was true pre gfc.
As for the digital post box, its very different from email. I believe the digital post box links a persons physical address to their online account, so you can tell Australia post to send your mail to the digital post box instead of to your letter box, and if you sign up all companies who have your address will automatically be able to send you bills through digital mail, you don’t go to each one to sign up.
As I personally understand it, post loses money on letters and international incoming parcels whose prices are all set by international trade agreements. This is how chinese websites sell 99c items with free postage to Australia. If they were privatised the government would have to subsidise anyone in the market and they would have incentive to drive prices up to receive more government $ like the gold plating In the power industry. At the moment post at least try and drive those prices down because they don’t get subsidised, they have to make up for it by profits in free market operations.
So post probably cant provitise until government get out of international postoal trade agreements / proce fixing.
do postal services have a postive net worth these days?
The reason the Howard government didn’t privatise Post was because it strained the Coalition to breaking point and used up all its political capital on the much more important task of privatising Telstra. In policy terms, of course, there is no longer any good reason for it to be in government ownership.
In fairness to Post, they are bound by international agreements and regulatory requirements over which they have no control. The main (but not only) reason for this is the agrarian socialists in the National Party, as well as the more overt ones in Labor and the Greens. Attempts to close even a single Post Office, whether in Balmain or Bullamakanka, attracts avalanches of hate mail to local MPs and Senators.
The upcoming generation has much less sentimental attachment to AP, but I fear that until a lot more old duffers die off it will be hard to make major changes – especially with an obstructive Senate.
However, Post itself is steadily contracting out more services and diversifying its business model to avoid being a drain on the taxpayer.
That’s a good point. Still, how long do you wait?
I’d rather have Australia Post run at a loss, delivering strictly limited and well defined services such as delivering letters, than ‘diversifying’ and being a player in the marketplace.
An economy dominated by state-run enterprises is a pathway to kleptocracy.
From a public service point of view, I do see a lot of old people lining up at the post office to pay stuff they have always done. No fancy internet payments or anything like that for them.
It’s also a useful place to conduct government business like passport applications and things like that.
That’s why you hear an outcry if a post office is slated for shutdown.
My local PO is actually quite helpful and manned with cheery staff. I think there are many more worthy targets than shutting those down. If anything you should be able to conduct more government business through the PO, and shut down those horrendous government services buildings.
I don’t pretend to know much about postal delivery, but I do know that one thing holding australian e-commerce back is the deep integration between stores and delivery that is possible with places like Fedex and UPS. If you order something from them, you can almost hourly parcel tracking, right up until it lands on Australian shores, and then it’s a crapshoot when it will actually turn up.
DD
I think you’ll find that a large number of these shops are franchise operations.
I agree that Post Offices are becoming de-facto government shop fronts and that if anything they should head more towards that direction (eg why not also handle the paperwork/photos for drivers licenses, car regos, medicare claims etc)?
A lot of these shop fronts though are already effectively privatised in many ways, just with (presumably) government subsidies to deliver the government type services.
I wonder how much impact the monopoly (floor price that exists for small parcels) that Australia post has really affects courier companies. Except for groceries I buy pretty much everything online these days and even for small items they increasingly are delivered by couriers instead of Australia post, so there must be some profit there to be made still.
The other feature which is becoming a lot more common is private couriers using post offices as backup storage/delivery centres when you’re not home. Presumably they have some agreement with Australia Post. I’d hate for that sort of thing to disappear in a fragmented market (eg post offices becoming part of courier A network and doesn’t work with courier B network so you have to pick your package from a place further away or even worse wait for a redelivery – much like you have the stupid problem with restaurants being either Coke or Pesi places).
The trial runs of post offices having unattended parcel pickup sound quite promising as well and I wonder if that would happen in a fragmented system.
One thing which does annoy me about the postal system is how postal addresses are still primarily address centric rather than person centric. In the modern world of integrated computer systems why can’t we have a unique id that we give out as a delivery address and Australia Post just map to our real address. Could possibly even sort/filter based on sender. That would make life a lot simpler when moving – you’d only need to notify Australia Post of a change of address when moving.
There’s also a problem of delivery drivers not actually checking to see if people are at home during the work week, though if anything the private companies are worse than Australia Post. At least with a fairly consistent driver the Australian Post ones eventually remember that some people are nearly always at home and so actually bother ringing the door bell.
You’re right, I just looked into it and they are franchises.
It is well worth remembering that Howard and others had to fight hard to get the Liberal Party to implement pro-market, pro-limited government policies. The Liberals are generally LINO.
Don’t expect to much pro-market, pro-limited government out of an Abbott government. Once they have sorted out the fiscal mess that they will inherit, it will be back to spend, spend, spend.
Australia post provide an extremely poor service.
On the two occasions in the last seven or so years that I’ve had cause to directly deal with them, both have concerned repeated incidents of inexcusable incompetence in relation to the delivery of my mail.
The first concerned the fact that the idiot postie wouldn’t place correspondence wholly within the (locked) letterbox, meaning I had cheques stolen and other correspondence destroyed by rain.
The second time was even more staggering – a new development had been built at the front of our block (we were at the back at “the axehead”) and once it was finished, the lobotomised, obviously illiterate and innumerate postie proceeded to deliver our mail to the new development’s letterboxes.
Despite repeated oral and written complaints (from both my neighbour and me), this situation persisted for several weeks. It only stopped after I fronted up at the local post office and proceeded to give the ‘supervisor’ a loud and lengthy piece of my mind.
Absolutely disgraceful.
I’ve been doing a lot of online shopping of late and the trick is to always tick the express delivery box. That way I get the goodies quicker and they aren’t delivered by Ozdraylia post.
The sooner it’s obliterated, like the ALfriggingPBC, the better.
Rabz – I think you’ll find in many places package delivery by Australia Post has already been privatised. It didn’t improve standards, if anything made it worse as there is higher staff turnover. Still better than the private firm courier delivery people though who just don’t seem to care much about the quality of delivery to residential homes.
No – snail mail comes via Oz post.
I’ve tested this recently on three occasions – one by snail mail (received in an Oz post ‘express’ post envelope) two by express delivery, duly delivered by private firms.
All bullshit. Australia Post alone would have imploded under e commerce.
“Privatisation is performed to raise revenue. The motive itself is in direct contradiction to the goal of a sound and competitive industry post-privatisation.”
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Err – no. Privatisation done properly is not about raising revenue. A long term government monopoly can be a rich revenue source.
However, it is true that the competition aspects have to be dealt with concurrently with privatisation. In the case of Post, it has a monopoly on regular snail mail only, including international snail mail. Everything else it does can also be done by private companies, and indeed is done by them.
Its great advantage is the national network of postal agencies, and deliveries, just as the big banks have an advantage through their branch networks. It is also sitting on some very valuable real estate assets.
The reason they are interested in expanding into the banking sector is because they already have a branch network in place.
That’s fine, if it’s a competitive industry.
AngryIrish, how do you suggest that the government should have dealt with the Teltra monopoly? Remember, back in the 1990s it was all about poles and wires and basic telephone services. The internet and mobiles were tiny blips on the horizon. No private company, large or small, could have challenged the ’800 pound gorilla’, as Richard Alston called it. Optus had a tiny niche in the cable and mobiles segment, and was losing money.
It’s easy to pontificate, but what would you have done instead?
AngryIrish, how do you suggest that the government should have dealt with the Telstra monopoly? Remember, back in the 1990s it was all about poles and wires and basic telephone services, on a national level. The internet and mobiles were tiny blips on the horizon. No private company, large or small, could have challenged the ’800 pound gorilla’, as Richard Alston called it. Optus had a tiny niche in the cable and mobiles segment, and was losing money.
It’s easy to pontificate, but what would you have done instead?
Chris
In places where the parcel delivery is privatised, ie, not within the post office where the posties sort the mail every day and have a clue* which names belong to which addresses, it’s not unheard of for parcels to be dropped at the wrong address and then back to the post office as RTS, not known at this address. Happened to me years ago. I had a number error in the address, by a couple of houses. The parcel came back. I was furious.
My local posties when I first moved here and the one before the useless ones I have now, knew me and were great. I never received neighbours mail. The new posties in the last few years (won the contract for cheapest delivery), are useless. We’re lucky to get our mail by six pm, if we get it on the day it arrives at the post office!
* you know, the ones who aren’t morons.
You haven’t explained how structural separation would have worked to diversify the industry. Australian taxpayers owned billions of dollars worth of assets in Telstra. Should they have just given them away? How? To whom?
In accounting terms, it wasn’t a cost free revenue raiser, either. Telstra as a company appeared on the books of the national accounts. The assets were transformed into cash, but it wasn’t the case that money just appeared from nowhere. It is no different to a company selling a subsidiary in that sense.
You seem to be saying that taxpayers should give away assets which they have funded for nothing, in the interests of some abstract ‘industry policy’. Happy to be corrected if I have misunderstood you on this.
Since when were they one in the same? You’re a bit unhinged tonight, Bird.
Yes it is. Fuck off or we’ll petition for your house to be nationalised.
No, your meds get messed up.
You are out of your fucking mind.
No. No it is not.
Bank money creation facilitates economic growth.
It has to. Banks do not create money out of thin air. They can only do so on deposits. No deposits, no money creation. Deposits are only continually made on the ongoing economically sound enterprise arising from productive capital investment.
Graeme calls this “extortion”. What the hell?
Bank lending creates deposits.
I’m mystified by AngryIrish’s trainwreck of thought here. He is opposed to privatisation because it involves exchanging assets for money, but they should’t be given away either. Yet, government businesses are bad because they crowd out private enterprise.
As for the banks and debts stuff, it just reads like gibberish to me.
Dot and johanna, I’m interested in your views on how the Telstra privatisation should have been handled.
I lean toward the view that the structural separation should have happened right at the start and that the retail arm of Telstra should have been sold off. I was of that opinion at the time and more or less hold it now. I do also remember how hard a sale it was politically at the time too.
What would you have done differently to the Howard govt in that circumstance?
tbh, I worked on the sale (sorry, can’t give details for legal reasons) but one thing I can say is that structural separation would have taken a long time – at least 18 months – and the government would have faced an election with the whole issue hanging and no guarantee that the sale would ever be implemented. That was a key reason why it didn’t happen.
Sometimes it just comes down to priorities, and not letting the perfect prevent the good from happening. It was a titanic political struggle, and every possible delay and obstruction had to be swept out of the way. Even so, it came down to a whisker of not getting through right up till the final vote.
I am not convinced that separation would have made a lot of difference anyway in the long run. The growth of wireless technology and the internet has had more to do with market diversification in the last decade or so than who owns the 1990s era infrastructure. Telstra’s market share has been slowly falling anyway.
The ACCC was tasked to police a level playing field for competitors in accessing infrastructure owned by Telstra, plus competitors have been building their own. It hasn’t been perfect, but there is no doubt that competition has put significant pressure on Telstra, as witnessed by the dramatic falls in the real price of telecommunications in recent years.
Fair enough, thanks for the insight. It seemed logical to me at the time that you would separate the “tracks” from the “rail cars”. I’m open to arguments to the contrary though.
Then the fish-porcupines cube the guacamole sideways and WE ALL LOSE.
AngryIrish, well how about you just truck off?
Birdie
What are you doing here again?
Wow, what a fruitloop. This is one troll that won’t get so much as a crumb of nourishment from me.
Rabz – where I am I receive my letters from an Australian post employee, but all packages arrive through an outsourced service. Basically I suspect they’re just guys who own a van.
e-commerce has seen a significant increase in work for Australia Post. A lot fewer letters, but a lot more packages.
Yes I suspect one of the issues is that contracts are just awarded based on price with little to no care about quality of delivery. The drivers just care about how fast they can “delivery” packages. So for example they’d rather just drop a note in a letterbox than walk to the front door of a house, ring a doorbell and wait for someone who probably isn’t home. And because it’s become such a cut-throat business there is much high turnover of staff/contracts so the local delivery people never get familiar with the areas they deliver to.
Time for a troll sweep.
So. This is Graeme Bird’s new blog, hey?
Yeah bullshit. The contractors got more work. The mail sorting centre in Redfern is as incompetent as ever.
Everyone has examples to countermand your Government loving bullshit.
Yawn.
I think there is rat rat squeaking somewhere behind the skirting board.
Hey Bird,
How are you, Squire?
Okay, who’s the chucklehead who told AngryIrish that his ideas intrigued us and that we would like to subscribe to his newsletter?
Squeak, squeak.
Yep, definitely vermin.