The ACCC is seeking stakeholder feedback on its preliminary view that it will not object to Australia Post’s proposal to increase the price of its reserved ordinary letter service by 25 per cent.
Under the draft proposal, Australia Post intends to increase the price for reserved ordinary letters delivered to the regular timetable from:
- $1.20 to $1.50 for ordinary small letters
- $2.40 to $3.00 for ordinary large letters up to 125 grams
- $3.60 to $4.50 for ordinary large letters between 125 grams and 250 grams.
Australia Post is not proposing to increase the price of concession stamps ($3 for five) or stamps for seasonal greeting cards (65 cents).
For an average Australian who sends approximately 15 small letters per year, the price increase would result in an additional cost of $4.50 per year.
After assessing the draft price notification in line with its role, the ACCC has concluded that Australia Post is not likely to recover revenue in excess of its costs for its reserved postal services.
“Our assessment found that Australia Post’s proposed price increase is unlikely to produce surplus revenue for the reserved letter service over the coming years,” ACCC Deputy Chair Mick Keogh said.
Australia Post forecasts that the number of delivery addresses will grow by about 200,000 per year, while the volume of domestic addressed letters delivered by Australia Post is projected to decline by 11.3 per cent a year until 2025-26.
“Australia Post’s ordinary letter delivery remains a crucial national service, however it faces increasing financial pressure in a landscape now dominated by digital forms of communication,” Mr Keogh said.
“We’re very conscious of the cost-of-living pressures currently affecting Australians, and we acknowledge that the stamp price increase will have some impact on consumers and small businesses."
“We consider that Australia Post should explore affordability measures for small businesses reliant on the letter service,” Mr Keogh said.
As part of its draft price notification assessment, the ACCC also examined Australia Post’s cost allocation and operating efficiency.
“We identified several improvements that Australia Post could make to the way it allocates costs, but found these changes would be unlikely to make the reserved letter service profitable,” Mr Keogh said.
The ACCC has provided Australia Post with a series of recommendations to improve its cost allocation model, record keeping, and information sharing.
“We expect Australia Post to implement our recommendations so we can properly consider any future proposed price increase,” Mr Keogh said.
The ACCC invites submissions in response to its preliminary view paper by 15 February 2024. Submissions received will be considered by the ACCC in making its final decision.
The preliminary view paper is available at: Australia Post - letter pricing 2023.
The ACCC will issue a final decision after it receives a formal price notification from Australia Post.
Australia Post must also notify the Minister for Communications of the proposed price increase and must not increase prices if the Minister rejects the proposal within 30 days.
Background
Australia Post’s proposed price change was outlined in a draft price notification provided to the ACCC in August 2023, revised in November, and corrected in December.
In September 2023, the ACCC undertook initial consultation on the August 2023 draft price notification. The ACCC has considered the submissions received through the September 2023 consultation in developing its preliminary view.
Under the Competition and Consumer Act, the ACCC is responsible for assessing proposed price increases by Australia Post for its reserved ordinary letter services delivered to its regular timetable. The ACCC must consider Australia Post’s proposal to increase the price of these services and may decide to:
- not object to the price increase
- not object to a price that is less than that proposed, or
- object to the price increase.
The ACCC does not have the role of approving any proposed price increase under the Australia Post price notification framework. Only the Minister for Communications has the power to reject a price increase proposed by Australia Post.
The price notification assessment was conducted concurrently with the Australian Government’s modernisation review into postal services. The initial outcomes of this review were announced in December 2023 and include a range of proposed changes to Australia Post’s performance standards. The ACCC has considered the implications of the modernisation announcement in making this assessment.