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25 June 1997

The Government announced its intention to introduce legislation to deregulate the postal service in April this year.

The Postal Services Act currently allows for competition in all areas of New Zealand Post’s business except domestic letters weighing 200 grams or less and costing 80 cents or less to post. New Zealand Post already competes in all other areas of its business: parcels, international mail, courier, financial transactions, contract logistics.

Under the current Deed of Understanding, the company is required to charge a nationally uniform price for standard letters; maintain a relationship between the price of the standard letter and movements in the Consumer Price Index; maintain agreed delivery frequencies to a specified number of delivery points in New Zealand; and operate a minimum number of retail outlets.

New Zealand Post has welcomed the Government’s decision to introduce legislation to deregulate the postal service.

The Postal Service Bill introduced proposes to: remove New Zealand Post’s present monopoly on the standard letter; allow full competition in postal services from a date to be advised; provide a transition regime to ensure New Zealand Post continues to meet social obligations provided under the Deed of Understanding and provides access to its competitors on fair and reasonable terms; maintain current provisions ensuring the security and integrity of the postal system, and extend these provisions to new operators; and provide for regulations to assist the co-ordination of box numbers and address information if necessary.

The company has been preparing for deregulation since corporatisation in 1987. Over the past ten years increasing competition and a desire to exceed customer expectations have been key drivers for the efficiency gains and service improvements the company has made. Customers have benefited from these moves with enhanced service and delivery standards, a greater range of products and services, an improved and extensive retail network, reduced prices for the standard letter (from 45 cents to 40 cents in 1995) and bulk business mail, and initiatives like the highly successful Free Post Day held last year.

New Zealand Post is committed to continuing to provide excellent service to customers throughout the country.

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22 April 1997
Hon. Maurice Williamson, Minister of Communications
Government Bill to Remove Postal Monopoly
“The Government will introduce legislation today to allow private companies to compete with New Zealand Post in the delivery of standard letters”, Communications Minister Maurice Williamson says.
“The removal of New Zealand Post’s monopoly will allow full competition and offer substantial benefits for postal users. Opportunities will be created for a range of new service providers to enter the market and consumers will have increased choice in service providers, types of services and price packages.

“To ensure that universal service is maintained for the benefits of all New Zealanders, the Government will be putting safeguards in place. A new Deed of Understanding will be negotiated with New Zealand Post to guarantee the quality and frequency of service.”

“The price of the standard letter will remain at 40 cents and be capped at no more than 45 cents for three years following the introduction of full competition. This will provide continued price stability for the foreseeable future”.

The Minister says this legislation will contribute substantially to the objectives of the coalition agreement. “The coalition partners agreed to maintain an open, internationally competitive economy, by managing cost structures downwards and continuing deregulation. The coalition agreement also provides for New Zealand Post to be maintained in public ownership.”

“Once the legislation has entered into effect, new operators will be able to offer letter delivery services in competition with New Zealand Post from a date to be appointed by the Governor-General by an Order in Council. This is unlikely to be before April 1998. In the meantime, the present regulatory regime will continue to apply and New Zealand Post will retain its monopoly.

Ends

Enquiries: Bridie Wilkinson (04) 471 9974

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Proposed Postal Services Regime: An Outline
Under the Postal Services Act 1987, New Zealand Post has the sole right to deliver letters weighing less than 200 grammes, for which a charge of 80c or less is made. Once the monopoly is removed, other postal operators will be free to compete in all sectors of the postal market.
The Postal Services Bill introduced today will:

remove New Zealand Post’s present monopoly on the standard letter post;

allow full competition in postal services from a date to be appointed by the Governor-General by Order in Council;

provide for a transitional information disclosure regime to ensure that New Zealand Post continues to meet social obligations provided under the Deed of understanding (discussed below) and provides access to its network for competitors on fair and reasonable terms;

maintain current provisions ensuring the security and integrity of the postal system, and extend these provisions to new operators (provisions include requirements to pass on misdirected or wrongly addressed mail and penalties for unlawfully opening letters); and

provide for regulations to assist the coordination of box numbers and address information if necessary.

A new Deed of Understanding will be negotiated with New Zealand Post to:
(i) maintain the company’s service levels and scope of the present network at current levels;

(ii) provide a price cap on the price of a basic letter so that it cannot rise

This paper summarises key changes that have occurred in New Zealand since the corporatisation of the postal operations in 1987.

New Zealand Post Limited has made impressive gains in efficiency since establishment as a State-Owned Enterprise (SOE). It moved from a loss of $37.9 million in 1986/87 to a $75.2 million after-tax profit in 1995/96. This was a 4 percent increase over the previous financial year. The company’s improved overall position since corporatisation has been founded mainly on productivity improvements and better management systems. Improvements include:

– increased productivity: 40 percent fewer staff since 1987 now handle 20 percent more business;

– through a better, more efficient network configuration, NZ Post now has more outlets than before corporatisation;

– the basic letter price has increased just once in the five years since corporatisation (from 40c to 45 cents in late 1991). It was reduced back to 40c effective from 2 October 1995;

– the rural delivery fee was abolished on 1 April 1995;

– larger business customers benefit from volume and pre-sorting discounts;

– service delivery performance for a basic letter has improved sharply;

– the thresholds for NZ Post’s statutory monopoly have been reduced by more than half since 1988.

2.1 Background

The first post office was established in New Zealand in 1840 at Russell, and the Post Office Act 1858 established the postal service as a separate government department. In 1862 agency services for other government departments were commenced, as the Post Office provided an important communication network. In 1880 the Post Office was merged with the Telegraph Department

The 1986 Mason-Morris Review of the New Zealand Post Office recommended the separation of the organisation into three discrete businesses to overcome structural deficiencies which impeded the effectiveness of its operations. The Government agreed to this recommendation. Three State-Owned Enterprises were formed to take over the commercial functions of telecommunications, banking and postal and agency services, while the regulatory functions were transferred to the Department of Trade and Industry (now the Ministry of Commerce).

From 1984 steps were taken to arrest a decline in the profitability of the postal and agency services of the Post Office. The basic letter post price was increased in 1985 from 25 cents to 30 cents, and again in February 1987, to 40 cents per item. In the final year before corporatisation, postal and agency services incurred a before-tax loss of $37.9 million, principally on agency services.

2.2 New Zealand Post Limited

New Zealand Post was established as a State-Owned Enterprise on 1 April 1987 with an initial share capital of $120 million. As at 31 March 1996, shareholders’ funds were $207 million.

New Zealand Post is registered as a limited liability company under New Zealand’s Companies Act 1993. Shareholders on behalf of Her Majesty the Queen of New Zealand (the Crown) are the Minister of Finance and the Minister for State-Owned Enterprises. New Zealand Post Limited has a board of directors, appointed by the shareholding Ministers, and drawn from the New Zealand community.

Each financial year the Board and the shareholding Ministers are required to agree on a Statement of Corporate Intent (SCI) for the current, and two succeeding financial years. The SCI details the specific information required under the State-Owned Enterprises Act 1986, including the objectives of the company, the nature and scope of its activities, and the financial performance targets for the three-year period. The agreed SCI is tabled in Parliament, as is the Annual Report and Financial Statement of the company.

New Zealand Post Limited is also subject to the key agencies and legislation which review public sector activities. These include the Controller and Auditor-General; the Official Information Act 1982; and the Ombudsman Act 1975.

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