Australia Post boss Paul Graham tips ‘mortgage belt’ shopping weakness as rates rise

Paul Graham says the nation’s mortgage belt is now reacting to higher interest rates by being more cautious when clicking on ‘buy’.

Australia Post chief executive Paul Graham says he is seeing pockets of weakness in his parcels delivery volumes as cost of living pressures and elevated interest rates forces consumers to rein in their online shopping.

Shoppers were also trading down and trying to “spread that dollar further” when they jumped online, Mr Graham argued, as they hunted for discounts.

And although he still strongly believes in the long-term future of e-commerce, the nation’s mortgage belt was now reacting to higher interest rates by being more cautious when clicking on ‘buy’.

Australia Post is the largest handler of parcels and packages in Australia and has seen its volumes explode as online shopping has taken off, however while volumes are roughly holding up the first cracks of weakness in parcel traffic come as a string of national retailers have warned this month of a sharp and significant downturn in in-store traffic and sales including online.

Speaking to The Australian after officially opening Australia Post’s newest parcel facility in Kemps Creek, NSW, that will service the high growth corridor through western Sydney, Mr Graham said he had first detected some softening parcels volumes a few months ago.

“We see it a little bit in our parcel volumes. We have got a very diverse customer range from micro, small and medium right the way through to the large corporate customers, quite well spread, and whilst we see it (weakness) in certain pockets overall volumes are holding up,” he said.

Australia Post boss Paul Graham in Surry Hills. Picture: John Feder

Australia Post had also picked up on the growing trend of consumers trading down to cheaper or ‘value’ offers, which is a switch in shopper behaviour retailers such as supermarkets, fashion and department stores have also called out.

“(This emerged) probably about two or three months ago, with the latest interest rate rises, they are still spending online but what they are doing is trying to spread that dollar further by shopping down market a little bit or looking for discounts,” Mr Graham said.

“What we are seeing is consumers spending more time online, looking at how they spend their money and skipping between more websites to look for that bargain or that same item but at a cheaper cost,” Mr Graham said.

Mr Graham said as interest rates rose, it would force many families, especially in the mortgage belt, to review their discretionary spending habits.

“And we may see that softening, but I think internet shopping is here to stay.”

Australia Post has reported ‘pockets of weakness’ in parcel volumes as shoppers retreat.

Evidence of a slowdown appearing in some of Australia Post’s parcel volumes comes as discretionary retailers this month have confessed to sliding sales and a general malaise spreading across consumers as they rein in spending to protect household budgets.

In the past few weeks there have been sales and profit warnings from Treasury Wine Estates, home furnishings retailer Adairs, fashion chain Universal Store, Baby Bunting, food and hamper group Maggie Beer Holdings and jeweller Michael Hill.

Up-market department store David Jones, it was revealed recently by The Australian, faced a sales slump in early June and as interest rates climb higher consumer confidence sinks lower.

Turning to the new parcels facility opened in western Sydney, Mr Graham said the region was a key growth corridor and a fast-growing economic hotspot which was taking up online shopping.

“Western Sydney is one of the fastest growing population areas of Sydney and indeed the rest of Australia, and there is continued online penetration in that area, and we deliver around 30,000 parcels a day to that catchment.

“What the new Kemps Creek facility will allow us to do is to deliver current capacity of 200,000 parcels, and we will have the capacity to double that throughput over the life of the facility.”

Servicing greater western Sydney and the surrounding region, the 33,680 sqm parcels facility is the second-largest sorting facility in the Australia Post network and has been designed with future expansion in mind. The modern, purpose-built facility incorporates parcel processing, pick-up and delivery, as well as transport and linehaul operations, with the planned western Sydney airport located only 15km away.

On 56,000 sqm of land, and almost as big as the Melbourne Cricket Ground, it was officially launched on Tuesday by Communications Minister Michelle Rowland, plus local member and Minister for Climate Change and Energy Chris Bowen and Mr Graham.

“With the population of the greater western Sydney region projected to grow, we’re investing in infrastructure and technology that sets us up to support the ever-changing needs of our communities and our customers,” Mr Graham said.

Mr Graham said Australia Post had spent $1bn in recent years to expand and build up the mail carrier’s infrastructure.

The federal government recently issued a discussion paper to spark a review and rethink of the operations of Australia Post and how it could be best positioned for coping in a fast-changing domestic and international landscape.

Australia Post has made a submission to that government inquiry, which will soon be made public, and Mr Graham said his submission focused on the crucial need for key reforms in areas such as more flexibility in the carrier’s ability to raise stamp prices, the obligation to deliver mail five days a week and the size of the post office network.