On 28 August 2015, the Australian Competition and Consumer Commission announced that it had received a draft proposal by Australia Post to increase the prices of its ordinary letter service.
Australia Post is proposing to introduce a basic postage rate of $1 for letters delivered at a new timetable, which allows an extra two business days for delivery to occur.
The ACCC is now releasing an Issues paper to identify issues on which the ACCC is seeking stakeholder views.
“Based on Australia Post’s proposal a $1 basic postage rate will significantly reduce the losses on Australia Post’s stamped letters by 2016-17. Further, Australia Post’s monopoly letter services (stamped and bulk business mail) are forecast to reverse their previous loss making state by 2016-17, ” ACCC Chairman Rod Sims said.
"This would be a turnaround in a short period with the price increase. However, stamped letters would continue to face losses and there is uncertainty around the longer-term rate of decline in letter volumes and a risk Australia Post’s overall monopoly letter services could return to net losses,” Mr Sims said.
The ACCC’s assessment of Australia Post’s pricing proposal will focus on:
- the method by which Australia Post allocates costs between its services
- Australia Post’s forecasts of letter demand and revenues
- the forecast improved financial performance of its monopoly letter business
- productivity improvements leading to operational cost savings expected from implementing a slower letter delivery timetable
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 rates of postage. Australia Post may increase the basic postage rate only if the Minister does not disapprove the proposed increase to the BPR within 30 days of receiving notification from Australia Post.
The ACCC is seeking submissions by 15 October 2015 and will publish its response to Australia Post’s draft proposal in November 2015.
The ACCC’s Issues Paper and details of how to make a submission are available at: Australia Post - letter pricing 2015.