ACCC announces final decision on postal prices

The Australian Competition and Consumer Commission today announced its final decision not to object to Australia Post's request to increase the price of the basic postage stamp from 45 cents to 50c.

The increase, which will take effect from January 2003, will see the price of the basic postage stamp rise for the first time in 10 years. It was found that currently, ordinary small letters are priced below cost.

The ACCC has also decided not to object to the proposed price structure for bulk PreSort mail.

"These arrangements have received support from bulk mail users and other interested parties", Acting ACCC Chairman, Mr Sitesh Bhojani, said. "Average prices for bulk mail services are not going up".

The ACCC expects this decision to enable Australia Post to achieve a reasonable rate of return over the five-year period to 2006/07.

"On the basis of information provided by Australia Post, further price increases should not be required over that time", Mr Bhojani said.

The ACCC issued a Preliminary Decision in September, in which it opposed Australia Post's initial proposal to increase the prices for large letters and bulk PreSort mail.

Australia Post subsequently lodged a revised submission on 7 October 2002. This document recognised the ACCC's concerns and proposed prices consistent with the general position expressed in the ACCC's Preliminary Decision.

"Australia Post restructured its charges in light of the ACCC's concerns", Mr Bhojani said.

The final decision maintains the most appropriate balance between the interest of consumers and the sustainability of basic postal services throughout Australia including obligations in rural and remote areas.

Throughout 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.

The final decision should be read in conjunction with the Preliminary View, which forms an Appendix to the document.

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.

In April 2002, Australia Post lodged with the ACCC a draft price notification to increase the cost of various postal services from January 2003. It argued 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. After the ACCC issued a Preliminary View on the draft notification, Australia Post revised its proposed prices. These revised prices were included.