Government braces for potential Australia Post bailout as budget lists it as new contingent liability

Buried in the budget is a warning that taxpayers for the first time might have to prop up Australia Post as it hurtles towards new financial losses.

The federal government has conceded for the first time that it might have to financially prop up Australia Post as the mail carrier hurtles towards its first financial loss in a decade, which could potentially punch a hole of hundreds of millions of dollars in the government’s finances.

Buried in the budget papers released on Tuesday night, the government has listed under its summary of contingent liabilities in its statement of risks a new entry for Australia Post under the heading “Australia Post’s financial sustainability”.

While Australia Post traditionally is self funding and doesn’t rely on the taxpayer to bail it out of losses and has its own balance sheet to borrow funds, if needed, the mail carrier too could ultimately call on its political masters and the parliament for financial aid if needed.

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

Only last month, Australia Post chief executive Paul Graham warned in a speech to the American Chamber of Commerce that the organisation was heading for a significant loss this financial year as its loss-making mail service drained it of funds.

Mr Graham warned that unless major reforms to the Act which Australia Post operated under were made by parliament the mail service could face a similar financial disaster witnessed by other mail organisations such as in Canada which was looking down the barrel of losses of in excess of $1bn.

The government may have to financially prop up the nation’s postal service. Picture: Christian Gilles

Draining it of money and causing widening losses in particular, the mail boss claimed, was its community service obligations such as delivering mail to people’s homes daily through the week, the complex and arduous process in getting stamp prices lifted to cover costs and the placement of Australia Post offices around the country.

That operating model is now under public review with submissions recently sent to the government.

The widening losses experienced by its traditional letters business could force the taxpayer to bail out Australia Post, Mr Graham warned, as it was forced to operate under a model created in the 1980s before the invention of the internet and mobile phones that had revolutionised communications but saddled Australia Post with extra costs.

Now that warning has been heeded by government as Australia Post faces its first financial loss since 2014 with the national mail carrier appearing in budget papers as a new contingent liability.

“Australia Post is a Government Business Enterprise wholly owned by the Commonwealth Government. In 2022–23, Australia Post is expected to report a full financial year loss, the first annual loss since 2014–15, as the digitisation of the global and national economy changes how many people and businesses use postal and related services,” the budget papers report.

“Australia Post does not receive financial support from the Australian Government, but is required to meet a range of Community Service Obligations.”

The government is undertaking public consultation to inform development of balanced changes to ensure postal services meet the needs of the Australian community both now and into the future, the budget papers said.

Australia Post has submitted its own submission to the government review and although it and Mr Graham have not revealed what proposals they had made it is believed the mail carrier will ask for changes to the Act. Those could allow it to deliver letters less than five days a week as well as other community service obligations reform that will halt the loss-making trajectory of its letters arm.