The Australian Competition and Consumer Commission has issued its view not to object to a draft proposal from Australia Post to introduce a basic postage rate of $1.
Australia Post is proposing to introduce a basic postage rate (BPR) of $1 for letters delivered on a new timetable, which allows an extra two business days for delivery to occur. Australia Post plans to introduce the new BPR in January 2016.
Australia Post is not proposing to increase the price of concession stamps or stamps for seasonal greeting cards.
The proposed rise in the BPR is aimed at increasing Australia Post’s revenue from its reserved letter services so as to offset continuing losses as delivery volumes of these letters decline. Australia Post considers that its reserved letter business is not recovering its costs and, in the absence of price increases and efficiency reforms to its business practices, will experience further losses given that the volume of letters is expected to continue to fall.
The ACCC has considered Australia Post’s forecasts for volumes and costs of its reserved letter services, and its proposed business reform program. It has come to the view that Australia Post will not likely recover revenue in excess of its costs for its monopoly letter services including its stamped letters over the period to 2017-18 with an increase in the basic postage rate to $1. This is due primarily to a forecast sustained decline in letter volumes.
The ACCC notes that Australia Post’s new delivery timetable and business reform program is intended to allow it to change its cost structure to become more flexible and more responsive to volume declines in the future.
“It’s important that Australia Post continues its focus on achieving cost reductions and operational efficiencies. We will look closely at Australia Post’s progress in this area in considering any future proposal for price increases”. ACCC Commissioner Cristina Cifuentes said
Under the Competition and Consumer Act 2010 the ACCC is responsible for assessing proposed price increases by Australia Post for its ordinary letter services.
The ACCC’s view on Australia Post’s draft proposal is available at: Australia Post - letter pricing 2015. The ACCC will release a final decision after Australia Post submits a formal price notification to the ACCC. The ACCC expects to release its final decision in December 2015.
The Australian Government recently regulated to allow the introduction of a two-speed letter service by Australia Post, which will distinguish between letters delivered at a priority and regular timetable.
The ACCC does not have the role of approving the proposed price increase. Rather, the ACCC is required to assess the proposed price increase in accordance with the Competition and Consumer Act (2010) and then notify Australia Post as to whether it objects to the proposed price increase.
In addition to the ACCC’s assessment, Australia Post must give written notice to the Minister for Communications of its intent to vary its BPR . Australia Post may increase the BPR only if the Minister does not disapprove the proposed increase to the BPR within 30 days of receiving notification from Australia Post.