Australia Post 'tipping point' could spell the 'beginning of the end'

Mail delivery could be less frequent and more expensive as the self-funded institution faces a reckoning.

Australians can expect changes to our letter and parcel delivery service as the government undertakes a major overhaul of Australia Post to ensure it can remain financially sustainable.

A discussion paper aimed at modernising the postal service has been launched ahead of Australia Post likely recording its first operating loss since 2015.

But the major shake-up means we are at a "tipping point" according to one expert who told Yahoo News Australia, one wrong move could mark "the beginning of the end" for mail service as we know it.

Australia Post and supply chain expert Adjunct Associate Professor Paul Alexander said there is only one way for the postal service to become profitable again, and that's to focus on the delivery of parcels, rather than letters. "But it's very competitive," he said.

Australia Post delivery worker.
The government is looking at changing how Australia Post operates. Source: AAP

Australia Post advantage over competitors

Currently, "heavy hitters" including FedEx, UPS and DHL have flooded the parcel delivery market, although Australia Post has something they don't.

"Australia Post's greatest asset is that it will go where others choose not to because they can't make a profit," Professor Alexander, from Curtin’s School of Management and Marketing, said. Whereas other services "cherry pick" the populated areas where there's a high concentration of addresses for the sake of making a profit.

Because of its community service obligations, Australia Post "has to deliver everywhere", particularly to rural and regional areas where the service is most dependent — and that includes letters too. Currently, it's obliged to deliver letters to 98 per cent of Australian homes, or "delivery points", every weekday and 99.7 per cent at least twice a week, the ABC reported — rules that were introduced in the 1980s and 1990s.

Last week, Communications Minister Michelle Rowland said it's important Australia Post is sustainable in these areas. "Australia Post not only serves as the post office, often it is the only banking service in town, the newsagent, or the retailer, so it is important," she told reporters on Thursday.

Australia post box.
Australia Post's letter business has seen a rapid decline, causing it to be unprofitable. Source: AAP

What does the change mean for Australians?

The discussions around how Australia Post will operate are still being had but Professor Alexander it will have to be a "balancing act" for it to work.

"The question now is whether Australia Post can emerge from this crisis stronger, or if it is the beginning of the end," he said, adding people may be "happy to accept a lower frequency of delivery if they get a better parcel service".

In 2008, 8.5 addressed letters were sent on average each week to Australian households. As of today, the number of letters households receive each week is an average of 2.4, prompting suggestions Australia Post could move away from daily letter deliveries.

Paying for delivery of Australia Post letters

Professor Alexender said reducing the frequency of letter deliveries could incur extra costs, not only with the cost of stamps, but we could start to see a change in how letters are delivered.

"Deliveries of letters could be more like parcels where you pay per delivery, potentially, in the future, or you would go pick up your letters from the post offices," he said. "There's going to be some changes in those services, just getting a letter that you probably don't often need every single day is no longer going to be, that's the discussion we're having."

Australia Post CEO addresses unprofitable letter business

Speaking of the proposed changes last week, Australia Post CEO Paul Graham said the organisation was entirely self-funded and didn't want to become a financial burden on the government.

"We seek to gain a bigger market share, but if we don't address our letter business, that will impact our ability to service the community," he said

Australia Post delivered more than 500 million parcels during the past financial year, but letter deliveries have been falling rapidly. Earlier this year, the postal service reported a first-half loss of $189 million and it is set to report its first annual loss since 2015.

Despite the talk of modernisation, the discussion paper said Australia Post would remain in public hands, regardless of any changes.

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