The Australian Competition and Consumer Commission today issued its decision not to object to Australia Post's proposed price increases, including lifting the basic letter rate from 55 to 60 cents.
Under the prices surveillance provisions of the Trade Practices Act 1974, the ACCC has a role in assessing proposed price increases for 'declared' services where Australia Post has a statutory monopoly, including certain services that have been 'reserved' under the Australian Postal Corporation Act in recognition of Australia Post's community service obligations. These are:
- the collection, within Australia, of letters for delivery within Australia
- the delivery of letters within Australia, and
- the exclusive right to issue postage stamps within Australia.
The price rises in letter services are proposed to take effect from 28 June 2010 and will apply to Small, Large and PreSort letter services.
"In 2009, the ACCC objected to Australia Post's proposed price increases due to concerns that Australia Post's costs were not falling in response to declining volumes," ACCC chairman Graeme Samuel said today.
Australia Post has now started to implement cost reduction strategies, however the ACCC considers that its cost reductions could be larger. The ACCC has assessed the need for a price rise based on Australia Post achieving an efficient level of cost reduction higher than it has forecast.
The ACCC is of the view that there is currently significant pressure on Australia Post's reserved service revenue streams.
Even with the proposed price increases and an efficient reduction in operating costs, the ACCC assesses that Australia Post still faces a loss on its reserved services. For this reason, the ACCC has not objected to Australia Post's proposed price rises.
"However, based on the current forecasts of letter volumes and costs, the ACCC considers that no changes to the basic postal rate should be required for the next two years beyond those proposed for June 2010," Mr Samuel said.
In the longer term, the ACCC considers that a continuing decline in demand will raise more fundamental questions about the appropriate approach to the pricing of Australia Post's reserved letter services. The ACCC notes that Australia Post is currently reviewing its business model to ensure it is a sustainable business which can continue to meet its community service obligations into the future.
The ACCC's Final Decision on Australia Post's price notification will be available from the ACCC's website.