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Australian Postal Corporation Act 1989

Industry Commission submission

This submission was released on 10 September 1997. The main findings of the submission were:

  • The Australian Postal Corporation Act 1989 requires Australia Post to provide a universal letter service that reasonably meets the social, industrial and commercial needs of the community.
  • The universal service would be enhanced if its objectives were more clearly specified and if performance standards, such as delivery times and frequencies, were set for Australia Post.
  • Estimates of the annual cost of the universal service would be improved if the technique used by Australia Post were open to scrutiny. It appears likely that the current technique prescribed by the Government overestimates the cost.
  • The universal service is currently funded by a cross subsidy through the reserved service. The reserved service restricts competition for certain types of letters. This allows Australia Post to maintain artificially high prices to some users (largely to businesses but also to some households), resulting in efficiency losses.
  • There is evidence that the uniform price of 45 cents for standard letters could be higher than needed to fund the universal service. Depending on how this is distributed there could be some further efficiency losses.
  • The efficiency losses and the burden on business users and some households would be reduced if the universal service were instead directly funded by the Government from consolidated revenue. This would also increase the transparency of the cost of the universal service.
  • Direct funding would also facilitate any future competitive tendering and contracting of the universal service by the Government to other providers, as well as Australia Post.
  • The reserved service should be abolished. Direct funding would make it redundant and permit the benefits of competition to flow through to those users who are currently overcharged for letter services.
  • The Act requires Australia Post to permit interconnection to its network. With the reserved service becoming redundant as a result of direct funding, the case for mandatory interconnection would become weaker.
  • Australia Post is also subject to some price regulation. If the reserved service were removed, Australia Post should be subject to prices monitoring by the ACCC until effective competition emerges. A maximum price should be set for standard letters, initially at 45 cents, but consideration should also be given to reducing that price.
  • The Commission suggests that these changes be adopted as soon as practicable, as Australia Post's financial status suggests that it is already well placed to meet the challenges of the above reforms.

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  • Contents

Preliminaries
Cover, Copyright, Contents, Abbreviations, Main Findings

1   Introduction
1.1  Why is the Commission making a submission?
1.2  Current postal arrangements
1.3  Structure of this submission

2   The postal services industry in Australia
2.1  Postal markets
2.2  The supply of postal services
2.3  The demand for postal services

3   Postal policy options
3.1  The benefits of the current arrangements
3.2  The costs of the current arrangements
3.3  The universal service
3.4  Uniform pricing
3.5  The reserved service
3.6  Suggested reform package

4   Pro-competitive regulation
4.1  Current prices surveillance and access arrangements
4.2  Options for price regulation of postal services
4.3  Options for access regulation in postal services
4.4  Access pricing
4.5  Summary

Appendices

A   A summary of recent demand studies

B   Estimating the efficiency effects of the current arrangements

C   Recent performance of Australia Post

References

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