Green light for 16.7% price rise at Australia Post

Australia Post has been given the green light to raise postage rates by as much as 16.7% from the end of this month. Regulators at the Australian Competition and Consumer Commission decided not to object to the pricing proposal lodged back in January, which would see the basic price of stamps raised from 60c to 70c.

The proposals would see a new concession rate, for those Australians holding official concession cards, leaving a more affordable 60c rate in place until 2017.

Australia Post told the regulator back in January that its declining letter volumes and the fixed cost of providing its universal postal service meant mounting losses for its letter business.

The price increase will “temporarily” reduce these losses with an expected $95m in extra revenue in 2014-15, but Australia Post is still forecasting a $313m loss in its domestic letter service in 2014 and 2015 with expectations of a 6.7% volume decline over the two years.

The regulator said in its ruling that it had not been able to form a view on the efficiency of Australia Post’s cost base during the 21 days it had to assess the pricing proposals. But, the ACCC said that even though it believed Australia Post’s estimates may “overstate” expected losses, the Post was “unlikely” to over-recover the costs of providing its monopoly letter services.

As a result, the regulator decided not to object to the pricing proposals.

Rod Sims, the ACCC chairman, said: “The ACCC found that there is increasing financial pressure on Australia Post’s letter services as a result of fewer letters being sent. Australia Post is currently under recovering on its reserved services costs. The magnitude of the under recovery is such that even with the proposed price increase, Australia Post is unlikely to recover more than an efficient level of costs.”

Australia Post’s price changes can still be vetoed by the government’s Minister of Communications, an unlikely scenario, but the company said it was expecting the new rates to come into effect on 31 March 2014.

“Improvements”

The company’s last increase in the basic postage rate was back in June 2010, when the rate was increased from 55c to 60c.

Among other price changes set to take effect on 31 March, large letters up to 125g will rise by 16.7% from $1.20 to $1.40, while large letters from 125g to 250g will see rates rise to $2.10.

Other prices are also set to change, including some business letter services such as PreSort Letter delivery, some domestic parcel products and services, mail redirection and hold services and some packaging products.

Australia Post said yesterday that it will also be introducing improvements to some of its products and services to provide greater choice and flexibility for customers.

“This includes extending our Pack and Track international parcel service to more countries and making an additional delivery timetable available for selected business mail products,” the company said.