I overlooked the woes of Australia Post yesterday when it announced it would lose $6.6 billion over the next 10 years, after being a highly profitable asset for as long as anyone can remember. Today it gets a bit more interesting, from the AFR:
Australia Post would introduce a two-speed mail service with an increase in stamp prices of up to $1.50 for its priority service and $1 for regular mail, under a federal government rescue plan expected within the next two weeks.
The changes mean that what is now next-day delivery for metropolitan-to-metropolitan mail could take up to three days to deliver. Communications Minister Malcolm Turnbull plans to freeze the price of stamps, which increased from 60¢ to 70¢ last March, for concession cardholders as well as on Christmas cards.
…The collapse in Australia Post’s profit was driven by a $151 million loss in the letters business as Australians stopped sending mail and switched to email.
The number of letters sent fell 8.2 per cent year-on-year, the largest decline recorded since the peak in 2008.
And raising the price of sending said letters will do what? Restore profitability or accelerate the decline? There’ll be some new equilibrium point here where sending a letter becomes some high-value niche act of romance that will stabilise revenues but it’s a long way below yet is my guess.
Like the Australian power sector, Australia Post is being disrupted by technology. In power it’s the push to roof-top solar and in the near future battery power, pulling punters off the grid and triggering price rises as utilities seek to recover volume losses, which drives more people to solar. In letters it is email being absurdly cheaper and more efficient that the physical letter supply chain.
That’s not all bad. There are big productivity gains to be had here, even if in the short run the transition causes pain.
It’s hard to avoid the conclusion that serious cost cuts are coming to your friendly neighbourhood posty.
