Continued from Australia Post: The Stamp Nazi’s – Part 1
FALLING COSTS
What is interesting to note is that the stamp price differential between actual cost and the inflation adjusted expected price has remained constant during a period when Australia Post has undergone massive cost reductions in its business. New technology has greatly improved efficiency and replaced many of the previous mail sorting staff. Even though the mail network has grown, the technology has resulted in falling employee numbers in recent times.
Australian Post’s annual reports detail the drastic fall in full-time staff numbers. In 1996, there were around 32,000 full-time employees, while 12 years later the number had fallen to around 25,000. These figures are even more astounding when you consider the population boom Australia experienced over that same period.
Staff reductions are just one part of the cost reduction picture. The service quality is no longer at the same standard due to a number of internal policy changes. Mail was previously delivered twice each weekday, plus once on a Saturday, but that has now been reduced to just once per weekday, if we are lucky. A reduction in deliveries mean less staff and lower costs, but the price of stamps has still risen even with these cutbacks.
When you factor in that fuel costs and interest rates are also well down on last years figures, it is very hard to substantiate another rise in the cost of basic stamps so soon after last years increase. Quite simply, costs have fallen and there is no financial basis for another price increase.
UNHAPPY CUSTOMERS
This may not have been the most appropriate time for Australia Post to announce their price increase intentions. Still reeling from the all too familiar incident of a postman failing to deliver their mail, it may have been wiser to wait for that storm cloud to clear before demanding the public to part with even more money from their pockets.
Just days ago, a postman from Wahroonga was arrested after he was found with more than 5,000 undelivered letters stored in his house; some of them even having been opened. But more bad news awaits the mails intended recipients as police are now intending to hold them as evidence for 6-12 months.
Undelivered mail is just one of the service quality complaints commonly heard regarding Australia Post, with another major issue centring around the recent delays in mail delivery times. The problem stems from a new policy designed to ‘improve efficiency’, which is effectively just another term for cutting staff numbers.
Local mail is now likely to be sent to large sorting centres, sometimes hundreds of km’s away. After sorting, the mail is sent to the destinations in order to be delivered. Local mail that was previously delivered the same day now has to be transported away, sorted, and sent back to the exact same place before it can be delivered. How this can be considered efficient is anyone’s guess.
WHY THE PRICE RISE?
If costs are falling and service levels are declining, then what can be the real reasons for Australia Post wanting to increase the price of stamps so soon? It seems to be a case of corporate greed when you look at the profits Australia Post is generating. We can only hope that it isn’t another case of a giant CEO pay package being granted.
Australia Post staff are scheduled to receive a 4% pay rise in September, which is well above the current national inflation rate. This is an extremely surprising move considering they are seeking additional revenue in the form of a stamp price increase. Surely it would have been smarter to increase the staff pay inline with inflation to prevent the ‘need’ for increased stamp prices.
In addition to the employee pay rise, Australia Post is also inline to fork out $500 bonuses for the staff if they achieve mail delivery targets. If all 25,000 employees were to receive the bonus, it would come at a cost of $12.5 million. Senior management will undoubtedly receive a far more generous bonus, stretching the total bonus payments further into the multitude of millions.
Australia Post has been generating large profits in recent years, with approximately 90% of its profit coming from selling products and services in competitive markets. This indicates that it would be prudent not to alienate their customer base and push them towards free technologies such as email. Similar to the petrol stations business model, where the bulk of the profits are made from selling junk inside the stores, Australia Post needs to keep the stamp price low to continue to attract customer to their stores.
RECORD PROFITS
It’s not like Australia Post are struggling financially. In fact, last year was actually a boom year for them, with the 2008 financial report detailing record profit levels. Their pre-tax profits increased 5.4% over the year to record their highest ever yearly profit of $592.2 million. Their managing director even admitted in the company’s annual report that the letter delivering business was doing very well, when he stated “Our improved financial returns are the result of strong revenue performances in each of the three core business areas”.
The company report also contains further incriminating evidence, showing that the proposed stamp price increases are definitely not necessary. Managing Director Graham John once again shoots Australia Post in the foot with statements such as “Our letters business continues to perform solidly in the face of widespread changes in communications technology and behaviour” and “We expect that the letters business will earn higher profits in 2008/09″.
Even a primary school child can work out that if they are expecting to make $136 million each year from the stamp price increases, they could instead reduce their profit by that same amount and still be making in excess of $466 million each year. The postage service is supposed to be provided to the Australian public by the government and should be operated at either no profit or a loss. Why should Australians have to pay to support the lifestyles of the corporate big-wigs?
Putting aside the corporate greed shown by Australia Post’s executives, the government should also take some of the blame. Australia Post should be a 100% government owned and operated institution, and should not be paying tax on their profits. Coincidentally, if the government were to waive around half of their tax liability, it would more than cover the expected revenue from the stamp price increases.
The reasoning given for the stamp price increases is not valid, the business sense behind the request is missing, and the need for the price rise is non-existent. Greed is the only clear and logical conclusion, and whilst Australia Post remains a monopoly we may just have to bite the bullet and pay the extra money. At least they have given us another excuse not to send Birthday and Christmas cards.