Australia Post to hike business parcel and mail costs as losses grow amid inflation hit

The government-owned business says inflation and rising costs has left it with no choice but to lift prices for handling business mail and parcels from July as it faces a gloomy financial outlook.

Australia Post will lift prices by as much as 10 per cent as losses rise from inflation.

Australia Post will lift its prices for a slew of mostly business parcels and package delivery services by as much as 10 per cent, as it blames inflationary pressures and growing losses across its mail operations for the higher rates.

It will see mail such as business letters and domestic parcels become more expensive, with prices rising between 3.5 per cent and 9.95 per cent. There will also be higher fees for manual handling of oversized and heavier mail and security handling of some packages.

The price rises will impact the carrier’s MyPost Business products and services and Australia Post has also pointed to growing losses in its traditional mail business for the need to ramp up its own fees and charges.

The new and higher fees will be particularly costly for local domestic smaller businesses that rely heavily on sending packages and parcels to customers and suppliers, adding on their own cost of doing business at a time when there is inflationary pressures across the country flowing from elevated energy, labour, transport and wages costs.

Higher charges for sending packages and parcels through the post will now be borne by business, as well as other retail customers, but many companies are likely to attempt to pass it on to the end consumer, adding further to household bills.

Australia Post will lift the price of handling business letters, packages and parcels from July 3. Picture: Steve Tyson

Australia Post wrote to its business customers on Friday informing them of the price changes, which will be effective from July 3, and has blamed it on the growing economic headwinds, cost inflation and losses within its own business.

“At Australia Post, we are working harder than ensure that we provide sustainable services and products for our customers,” wrote Australia Post executive general manager, parcel, post and e-commerce services Gary Starr as he broke the bad news.

“We’re writing to you today to advise of changes to the price of some of our retail and MyPost Business products and services.

“As a self-funded organisation, we are challenged by growing costs and these changes are necessary to help address increasing losses.”

The price changes will include up 4.6 per cent for the weighted average of international parcel services, a 5.3 per cent lift in the weighted average price for business letters, up 8.7 per cent for unaddressed mail services and 9.95 per cent price hike for weighted average domestic parcel services.

There will also be changes to a range of other fees and charges for Australia Post services, due to increasing costs within its network, the carrier said.

This will include a manual handling surcharge for articles that exceed maximum weight limits or size or that cannot be safely sorted, which will lift to $11.50 to $14.

A security management charge for articles sent via Express Post to help with the ongoing cost of security requirements that will increase by 0.5 per cent to 4.35 per cent.

A missing manifest fee for articles lodged without manifest details will increase from $25 to $30 where previously Australia Post said it had absorbed additional costs linked with the treatment of these articles over the past five years.

Mr Starr later told The Weekend Australian the mail carrier had been constantly looking at the balance between customer expectations and managing costs across its business.

“As you know right now we are facing into significant financial headwinds, in a highly competitive market. Those inflationary pressures are across labour energy, just to name a few, and as we’ve looked at our annual price review, we have landed on these price increases but we always are trying to get that fine balance.”

These higher costs also include an elevated wages bill after Australia Post agreed to an enterprise agreement that secured for more than 30,000 Award-level team members a deal which will pay on the higher of 3 per cent or CPI for the first two years of those wages agreements. This has so far triggered a 6.1 per cent pay increase and with inflation remaining well above 5 per cent is likely to see higher wage hikes.

Meanwhile, Australia Post is facing significant losses this financial year driven by widening losses at its traditional mail service.

But Mr Starr said the fresh price rises for the parcels and packaging arm was not being used to cross subsidise the letters business.

“We are seeing those cost inputs to our parcels business go up significantly with the inflation in labour, energy and other costs and that is just reflected in our pricing.

“We are not subsidising one business with another.”

He said its profitable parcels and packages arm was witnessing pressures on its margins in what was a highly competitive market for package deliveries.

Australia Post needs to gain approval from the Australian Competition and Consumer Commission to lift its stampsm price, which is a long, drawn out and complicated affair that is highly regulated and can often trigger a community backlash.

The national mail carrier can more easily and independently hike prices for its parcels and packages delivery arm.

“We are under margin pressure in our parcels business given the highly competitive nature of the market and that we need to continue to invest, like we have with $1bn over the last three years, we will invest a significant amount in this financial year and next financial year in network, fleet, digital and customer experience.”

Australia Post executives have been warning for years that growing losses at the carrier were growing fast and that changes in the way it operates and charges customers would need to be addressed.
In May the federal government 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.

Australia Post CEO Paul Graham has warned the growing losses at the mail carrier would need to be addressed or the federal government and taxpayers could be forced to bail it out. John Feder/The Australian.

Buried in the budget papers released on budget night, the government 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.

Only in April, 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.

At that speech Mr Graham labelled regulations the mail service operates under as “no longer fit for purpose”, with it governed by a parliamentary act created before the internet and smartphone revolutions and whose staleness now threatens the financial viability of the 214-year-old institution.
Mr Graham warned the postal service was at a crossroads, as the erosion of its traditional business model of delivering mail accelerated, placing Australia Post on track to post a steep financial loss this financial year on its letters business, after posting a $189m loss for the first half of 2023.

He added that it could face a similar fate as Canada Post, which due to inaction by politicians is now on track to a $1bn loss. Addressing the American Chamber of Commerce in Melbourne in April, Mr Graham urged Australian politicians to “get in front of change” and make the reforms necessary to ensure the future of the national mail service.