ACCC decision on postal prices

The Australian Competition and Consumer Commission has made a preliminary decision not to object to Australia Post's request to increase the price of the basic postage stamp from 45 cents to 50c from January 2003.

But it will oppose other proposed price rises relating to bulk mail, large letters and local delivery services.

The preliminary decision paves the way for the first rise in the price of the basic postage stamp since 1992.

ACCC Chairman, Professor Allan Fels, said the decision was the most appropriate balance between the interests of mail users and the sustainability of the basic postal service provided by Australia Post.

"The ACCC is aware of the need to ensure that Australia Post can achieve a commercial rate of return in the provision of postal services", he said.

"The resulting increase in revenue should ensure Australia Post continues to provide the high level of service consumers have become accustomed to.

"It will also help Australia Post to continue meeting its important community service obligations in rural and remote areas.

"The ACCC considers the proposed increase in the cost of postage stamps will enable Australia Post to achieve adequate returns for at least the next five years".

Professor Fels identified access to postal services as an important factor in the ACCC's decision.

"By increasing the cost of postage stamps, there could be more scope for Australia Post to negotiate distribution agreements with third parties such as newsagents. This would improve the availability of stamps for consumers".

However, Professor Fels said the proposed price rises relating to bulk mail and related services were not warranted and will not be recommended to the government.

"Such mail is already making good profits for Australia Post and has been cross-subsidising full rate mail users. Further, users of bulk mail services have been affected by recent price increases after the phasing out of AdPost and discounts for unbarcoded mail".

During the review the ACCC considered a number of submissions from interested parties, including major users of mail services, retailers, and private citizens. It also held a series of community forums around Australia and a technical forum in Melbourne.

Australia Post must to apply to the ACCC if it wishes to increase the cost of various postal services increases as they are declared services under the Prices Surveillance Act 1983.

It made an application in April 2002, arguing the increases were necessary due to falling volume growth, reduced opportunities for productivity gains, the need to fund its community service obligation and the need to ensure a commercially viable rate of return.

The ACCC is seeking submissions on its preliminary view by 27 September 2002.

Background

Under the Australia Postal Corporation Act, certain postal services are 'reserved' to Australia Post. This means that Australia Post has the exclusive right to provide these services. In particular, Australia Post has an exclusive right to deliver letters within Australia and an exclusive right to issue postage stamps.

There are a number of exceptions to the reserved services. Most notably, letters weighing more than 250g are not reserved, nor are letters that are carried for a charge more than four times the basic postage rate. Since the current postage rate is 45c, this means that letters carried for a fee of over $1.80 are not reserved.

Australia Post also has a universal service obligation. This means that it must carry and deliver standard letters at a uniform postage rate - currently 45c - to anywhere in Australia.