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‘Unstoppable decline’: The reasons why Australia Post has to change

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‘Unstoppable decline’: The reasons why Australia Post has to change

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March 2, 2023February 12, 2023

Key points
  • Australia Post is struggling due to a sharp decline in its letter delivery business.
  • Parcel deliveries are growing, but the sector is increasingly competitive.
  • The federal government has asked Australians to share their thoughts on how to modernise Australia Post.
With most Australians jumping online to pay bills or order passports, and into social channels or messaging apps to communicate, the federal government is questioning where Australia Post fits into modern Australia.
The 214-year-old organisation says it’s facing an uncertain future, with its letter business in “unstoppable decline” since 2008.

Its parcel delivery business is growing steadily thanks to our new thirst for online shopping, but it’s facing stiff competition from courier providers in terms of delivery times, reach, quality of service and price, at a time when delivery costs are rising.

On Thursday, the federal government launched a discussion paper and consultation process to modernise Australia Post and support its long-term financial sustainability.

So how does Australia Post work, why is it in trouble now and what could this mean for the future?

How is Australia Post managed and funded?

Australia Post is owned and operated by the government though it is given a corporate identity and is completely self-funded, which means that it aims to run profitably by controlling costs and selling goods and services at a price to cover costs.

Much of the network is operated by private individuals acting as licensees, agents or franchisees.

Why is it in trouble?

Australia Post is expected to run at a loss in this financial year for the first time since 2015, with those losses expected to grow in the years ahead, mainly due to a steep decline in its letter delivery business.

Australians received an average of 2.4 letters each week in the 2022 financial year, down from a peak of 8.5 letters in the 2008 financial year. By the end of the decade, Australia Post expect us to receive less than one letter per week.

Australians received an average of 2.4 letters each week in the 2022 financial year, down from a peak of 8.5 letters in 2007-2008. Source: SBS News

At the same time, post offices conducted 192 million transactions in the 2022 financial year, 22 million fewer than in 2019.

Australia Post has said it expects visits to keep declining with the continued shift to digitised services.

Bar chart showing how visits to Australia Post outlets are on the decline.

Australia Post has said it expects visits post offices to keep declining with the continued shift to digitised services. Source: SBS News

Meanwhile visits to Australia Post’s digital channels were up 25 per cent in the 2022 financial year from the previous year to 902 million.

Parcel business becoming ‘highly competitive’

Australia Post delivered 526 million parcels in the 2022 financial year, more than double the 226 million it delivered in the 2013 financial year. And it expects parcel volumes to grow in line with longer-term retail trends.

The COVID-19 pandemic has fuelled this growth, with one in five retail sales now completed online.
Australia’s courier, express and parcel (CEP) market as a whole delivered one billion parcels in 2021, with the average Australian receiving more than 40 parcels each year, according to an .
It said the CEP market as a whole is expected to grow by 5.46 per cent from 2023 to 2027.
But while the market is “efficient and very well developed”, it is also becoming “highly competitive”, Mordor said, with major players including Toll, FedEx, Star Track Express (owned by Australia Post), TNT Express, DHL and UPS.

“Most of the players are developing a competitive edge through the infusion of technology in their systems, like the use of drones and WMS system,” it added.

Will we see less regular letter deliveries?

The government says it wants to modernise Australia’s postal services to ensure they are financially sustainable so they can continue to service Australians and keep people employed.
The government has suggested ways to modernise the service could include increasing flexibility and delivery reliability of parcels, increasing convenience, investing in better technology and changing letter delivery standards and pricing arrangements.
At the moment, Australia Post is obliged to deliver letters at least two days each week for 99.7 per cent of delivery points, and every business day for 98 per cent of delivery points.
A small letter or postcard can be sent anywhere in Australia for $1.20.

There are more than 4,300 post offices throughout the country, with more than 2,500 of these in rural, regional and remote areas, while Australia Post directly employs more than 36,000 people and more than 60,000 indirectly.

A tile showing some fun facts about Australia Post.

There are more than 4,300 post offices throughout the country, with more than 2,500 of these in rural, regional and remote communities. Source: SBS News / Leon Wang

Minister for Communications Michelle Rowland said the government wanted to help Australia Post adapt to changes in technology, commerce and consumer expectations.

“The consultation announced today will ensure Australia Post maintains the long-term financial stability it needs to continue supporting small businesses and providing essential community services, particularly in our rural, regional and remote communities,” she said in a statement.

“I encourage all Australians to have their say, especially small businesses. Your opinion will help us as we consider options to shape postal services, and sustain Australia Post now and into the future.”

Australia Post standard mail and Express Post letter boxes at Australia Post Strawberry Hills Post Office in Sydney.

The government says it wants to modernise Australia’s postal services to ensure they are financially sustainable. Source: AAP / Dean Lewins

What does Australia Post say?

Australia Post’s CEO Paul Graham said the launch of the discussion paper and community consultation process was “a positive first step”.
“A discussion on modernising postal services and Australia Post is the conversation the Australian community needs to have. Australia Post’s letters business has been in an unstoppable decline since 2008 and the 214-year-old postal service faces an uncertain future … A modernised and financially sustainable Australia Post will be able to continue to invest in new products and services that meet the evolving needs of customers and communities.”
He added the status quo was “no longer an option”.
“The business is on a path towards significant losses that, without change, will have to be covered by the Australian taxpayer and that is money that could be better spent on schools, hospitals and roads.”
The government has set up a web page explaining the review and .