The Australian Competition and Consumer Commission today issued its view objecting to Australia Post's draft proposal to increase the prices of the letter services over which it has a statutory monopoly in 2010.
Australia Post provided the ACCC with its draft pricing proposal on 24 July 2009, which sought increases in the prices of a number of its Small, Large and PreSort letter services. Australia Post also sought to increase the basic postage rate from 55 to 60 cents.
Demand for Australia Post's monopoly letter services declined significantly between 2007-08 and 2008-09, and Australia Post expects the decline in demand to continue.
"The relationship between demand and costs is a critical issue," ACCC chairman Graeme Samuel said today. "The ACCC recognises that some of Australia Post's costs are fixed. However, overall the cost base would be expected to respond as demand declines. The proposed costs of Australia Post in the material provided to the ACCC do not reflect this decline."
The ACCC has also been unable to determine how Australia Post's demand forecasts were derived.
"Accordingly, the ACCC is unable to agree to Australia Post's proposed price increases at present," Mr Samuel said.
Under the prices surveillance provisions of the Trade Practices Act 1974, the ACCC has a role in assessing proposed price increases for 'declared' services, including certain services that have been 'reserved' to Australia Post under the Australian Postal Corporation Act in recognition of Australia Post’s community service obligations. These are:
- the collection, within Australia, of letters for delivery within Australia;
- the delivery of letters within Australia;
- the exclusive right to issue postage stamps within Australia.
There are a number of exceptions to the reserved services, including letters weighing more than 250g and letters that are carried for a charge more than four times the basic postal rate.
The ACCC's view on Australia Post's draft price notification will be available from the ACCC's website.