On borrowed time: Letters are a luxury Australia Post can’t afford

In the December half, election mail outs, mandated postal notification from banks of interest rate increases and alerts of cyberattacks boosted letters revenue. But most Australians would, for example, have already received email or app notifications from their banks and digital updates from the likes of Optus and Medibank around leaked data.

Attention to Australia Post’s longer term structural issues were diverted over the past few years – firstly by COVID and then by the sensational governance snafus that resulted in the departure of its chief executive Christine Holgate over the bizarre Cartier executive gift affair.

During COVID, Australia Post was able to shrink its daily postal delivery rules to every second day for nine months. At the same time its parcel delivery business became more profitable as consumers embraced online shopping. However, even the growth in the parcel business is starting to moderate.

The healthy part of Australia Post’s business, parcel delivery, operates in the real commercial world and with that comes intense competition and the need to invest in technology and distribution. And its competitors don’t have to contend with the financial albatross of a letters division.

Australia Post has been investing in its parcels’ division to improve service and cut costs, but the improvements won’t be enough to offset the financial hit from the declining letter revenues.

Indeed, the cost of delivering daily mail only increases each year as 200,000 households are created.

The management team led by Paul Graham has made its position clear to the government and unions – the latter seems more concerned about last year’s executive bonuses. No company likes to talk about job losses but reducing the frequency of mail deliveries will inevitably lead to that – whether they are Australia Post staff or subcontractors.

But as Graham puts it, “we are at a crossroads and the headwinds facing our business have never been stronger.”“Our Letters business continues to decline, as volumes fall and costs increase. Changing customer behaviours are also impacting our retail network, with continuing digitisation resulting in declining retail transactions at Post Offices.”

A pretty grim assessment that doesn’t exactly paint a picture of commercial sustainability.