The real battle over Australia Post

One former AusPost director and CEO says Holgate’s legacy will be shoring up regional post offices – a move that has won her the unflinching support of many small franchisees. At the same time, Holgate believed there was a continued role for letters, if the union remained flexible, automation was expanded and costs were reduced.

Despite their differences in personal style, in some ways Holgate’s vision carried on from her predecessor, Ahmed Fahour. Fahour doubled down on parcels by buying out StarTrack Express for more than $1 billion, and he got AusPost back in the black after a $222 million loss in 2015.

Holgate says the results speak for themselves: AusPost recently revealed the pandemic bump to parcels means the business is on track to deliver a record $8 billion in revenue this year and more than $300 million in profit for taxpayers.

The results have defied all the consultants, who have so far been proved well off the mark. BCG prepared a report for Fahour in 2014 that forecast AusPost would suffer cumulative losses of $6.6 billion over the following 10 years.

The former director who spoke to AFR Weekend says the latest BCG report had a “preconceived answer in mind. Holgate wasn’t asked to contribute and the data was rubbery.“

The approach backed by the Institute of Public Affairs – but which the government insists is not on the table – is a full or partial privatisation of AusPost similar to Britain’s Royal Mail and Germany’s Deutsche Post, or local businesses such as Telstra, CBA, Qantas, Medibank and CSL.

“There seems to be no political will to free Australia Post from the shackles of government control,” says IPA spokesman Evan Mulholland. “There is no need for a state-owned logistics company given the size of the market.”

BCG insists that while partial privatisation was canvassed as one of four options in its latest report for the government, it is not the recommended path.

It urges a middle ground: for AusPost to cut corporate costs, sell up to 190 unprofitable metro outlets (the ones it owns, not the 2900 licensed outlets) and hive off minor businesses such as StarTrack Road Express and SecurePay.

The prevailing view among bureaucrats and ministerial advisers is that AusPost should concentrate on its core business and not become distracted by shiny new services such as digital identity.

Sources among that group argue that while the pandemic has boosted parcel revenues, profits remain “razor thin” and the COVID-19 boom has only delayed the inevitable: that letter losses will subsume parcel profits.

“It is a reprieve … it has only kicked the can down the road,” one insider says.

The future path for AusPost may have largely been decided with the government seizing back much control.

After more than a decade of so-called “rock star CEOs”, where Fahour and Holgate had big visions and largely ran AusPost as a business independent of government, more Coalition-aligned directors have joined the board. Holgate claims their eagerness to “curry favour with [their] political masters” played a role in her demise.

The new AusPost chief executive, Woolworths supply chain boss Paul Graham, does not start until September, but insiders already predict he will be a back-to-basics leader. He is expected to aim for gradual improvement and has a track record for taking on the unions.

Rico Back knows better than most the difficult path of global postal services.

The German businessman was a founding member and former CEO of German Parcel (now GLS Group) and headed up Britain’s privatised Royal Mail until last year.

He says the same trends are playing out across Germany, France, China and the US.

“When you make a strategy, you have to think about five, eight or 10 years ahead. We knew letters were going down by more than 50 per cent the next five years and parcels would grow, we thought by about 10 per cent,” he tells AFR Weekend from his home in Switzerland.

In reality, the pandemic saw parcel growth accelerate much faster, with the 45,000 parcels sent from Britain to Australia each day doubling to 90,000.

“Both Christine and I put our investments into the growing sector. You cannot stick to the past, you have to deliver the present but get fit for the future. Christine invested even earlier than me into automation and the digital world.

“What should not come into your thinking is am I left, am I right, what political party am I? You must think what the country needs. If you do that as a politician, you will do the right thing and the country will recognise it.

“Everyone wants to have a parcel business, no-one wants to have a letters business,” he says, adding that it is possible to have both if the government backs reform to allow greater flexibility.

“The unions can’t live in the ’70s any more. I’m sorry to say that, but the world is moving on. You cannot live, even in a government-owned business, on subsidies.

“As long as the letters go with the parcels, it is not a problem. It is not so much of a drag because you are visiting the house door anyway. If you separate it, you will only have to subsidise a loss-making letters business the country still needs.”

The former AusPost director agrees with Back and Holgate that a scaled-back service for letters can survive because “home deliveries will only grow as letters become a diminishing fraction of the service”. But the director agrees it will require tough structural reform, such as more automation and drastic increases in stamp prices to accelerate the demise of snail mail.

“The thing the government is way too gun-shy on is overthinking the impact of stamp price increases,” the director says. “You carve out concessions, but for everyone else you could set it at a $1.50 and that would be fine. If they just bit the bullet that would take a lot of problems off the table.“