Australia Post delivers $88m loss as letter volumes dive to 1950s levels

As letter deliveries collapse and Australia Post is left as a ‘banker of last resort’ in many towns, the mail carrier’s boss says it needs major reforms to return it to profitability.

Australia Post chief executive Paul Graham sees a pathway to profitability for the mail carrier but it will depend on continued reforms.

The slow death of letters down to 1950s levels has punched a widening hole in Australia Post’s annual accounts, but chief executive Paul Graham believes he sees a path back to profitability for the mail carrier as it grows its parcels business and takes on banking services.

Australia Post recorded a pre-tax loss of $88.5m for the 2024 financial year, which was an improvement on the $200.3m loss posted in fiscal 2023.

Injecting some optimism back into Mr Graham’s outlook is the wave of reforms pushed through in April on letter delivery times, a hike in prices from July and discussions now underway with three of the big four banks on them better funding its Bank@Post service.

Australia Post is in discussions with Commonwealth Bank, Westpac and National Australia Bank to provide more funding to Bank@Post as many bank branches shut down, often leaving Australia Post as the banker of last resort. ANZ continues to refuse to be a part of Bank@Post.

While Australians continue to embrace online shopping to trigger a flood of parcels and packages, led by dominant online retail players such as China’s Temu and Shein, Mr Graham warned the carrier’s very profitable parcels delivery business was facing heavy competition from Amazon down to individual drivers delivering to people’s homes.

The historic, demographic and technological upheavals hurtling through Australia Post were highlighted on Friday as the company booked its third-ever loss in almost 120 years, which was mostly driven by its legacy letters business.

Letters volumes of 1.76 billion were down 12.9 per cent on the previous year with losses in the letters business of $361.8m, down 5.8 per cent. Australia Post said parcels and services revenue of $7.42bn was up 2.3 per cent. Revenue rose 1.8 per cent to $9.13bn for fiscal 2024.

The mail carrier said it reaped business efficiencies of $268.9m, up from $236.7m previously.

Australia Post has recorded its third-ever loss, but is hopeful of a return to profitability as key reforms pay off.

Mr Graham said while it was pleasing to see an improved business performance, Australia Post was still staring into structural challenges that were not going away.

He said it was possible for Australia Post to return to profitability, but this would depend on further reforms, growth in the parcel market and better returns on its banking services with the help of the big four banks.

“We think (profitability) probably is (within reach) but as we know the parcel market is incredibly competitive, so we will have to maintain our strength in that market and that is going to be tough, we do believe as mail declines we have a two-speed business and that additional support will be needed around mail delivery,” Mr Graham told The Australian.

“We are now at mail volumes we haven’t seen since the 1950s … I believe additional reform will allow us to have additional confidence in getting to that sustained profitability but there is a whole lot of things that we can do that will also contribute to that.”

Reforms in April to reduce mail deliveries through the week as well as push up stamp prices and other prices for deliveries should help continue that profitable momentum into 2025, he said.

“We believe they will. We started the reform in April and we have done 37 of 174 facilities on the new delivery model and we are only just seeing the signs of that and we are encouraged by what we have seen so far, both in terms of customer reaction – which has been incredibly positive – as well as productivity, and certainly it is one of the platforms that will assist us in getting us to that pathway to profitability.

“There are irreversible challenges confronting us, including the decline of letters and the shift from over-the-counter transactions to digital services. I’m pleased the things we do have control over, such as simplifying our business, removing complexity and cost, driving efficiencies and careful expense management, have driven the improved financial performance for the year.”

Mr Graham said Australia Post was in discussions with CBA, NAB and Westpac over better funding of the carrier’s banking services and he was hopeful this would be concluded by the end of calendar 2024.

“We are working with the three banks that are a part of Bank@Post – ANZ is the only outlier – and we are working with them on what we believe is a fair adjustment to the current agreement to take into account the increased costs and complexity we have seen in that.

“I think they (the banks) understand that but we are yet to conclude a deal. The government is continuing to show support and interest in understanding what our challenges are and I think are very conscious of the fact that we provide an essential service to the community in relation to banking and cash provision, particularly in rural and regional Australia.”

Letter volumes have fallen to 1950s levels, says Australia Post boss Paul Graham.

NAB CEO Andrew Irvine said the bank would be constructive in talks with Australia Post over the provision of banking services.

Mr Irvine met recently with Mr Graham to discuss ongoing issues with bank customers accessing services at post offices.

Appearing before a parliamentary inquiry on Friday, Mr Irvine said the bank wanted Australia Post to be transparent about the issues it was facing.

NAB expected to meet transaction levels, contained within a 10-year agreement with Australia Post, in the year ended September 30, 2024.

In the May budget the government for the second year running warned that the loss-making national mail carrier could require a taxpayer rescue. The organisation’s near-term fortunes seemed to have improved, helped by structural reforms. Last year Australia Post’s financial state was described as “deteriorating” whereas this year it was couched in terms of “uncertainty”.

“Given the uncertainty surrounding Australia Post’s financial position, there is a risk that the Australian government will need to consider providing financial assistance to Australia Post in the future,’’ budget papers said.