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ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS
08/05/2000
Postal Services Legislation Amendment Bill 2000

CHAIR —Welcome. The committee has before it submission No. 15, which it has authorised to be published. Do you wish to make any alterations or additions to your submission?

Mrs McGrath-Kerr —I believe that we have given you some incorrect figures in relation to private boxes. It is on page 3. It was not brought to my attention until very late on Friday and I have been unable to get accurate figures, but I believe that the figure of 99,000 in the top row should probably have a seven in front of it. It should be 799,000. I will get the accurate figures and forward them to you. I do apologise. Overall, I believe there are 1.3 million private boxes in Australia. That makes our total look a little ridiculous. The figure is probably a six or seven. I apologise, but I will get the correct figures to you. Apart from that, there are no alterations.

CHAIR —Would you like to make an opening statement?

Mrs McGrath-Kerr —Yes, I would like to say that we are concerned about this legislation. We do not wish to see it go through. We would prefer it not to be passed. If so, there are certainly many things that we would prefer to have changed in it. To add to something that we have heard since we have been sitting here, licensees are seriously concerned that licensed post offices could be closed under this bill. Although there is the commitment that postal outlets will not be closed as a result of legislation—that is a commitment made by the current government—we have concerns that many licensed post offices could actually be forced to close because they become unviable and the licensee closes the outlet himself or herself, not because Australia Post, the government or whoever comes along and says, `Thou shalt be closed.' That is just a point that I would like to make.

We are certainly concerned about the access regime. We are concerned about the things leading up to that, such as aggregation. We believe that, because revenue from mail is under threat and mail revenue is clearly most important for the operators of licensed post offices, that could make post offices unviable. Aggregation of mail which is currently going across post office counters, including licensed post offices, will reduce the mail across counters that way. So we have serious concerns about that.

The most profitable licensed post offices at the moment are what we call balanced—they have a balanced mix of business. They have a balance of stamp sales, inward mail—including parcels—Billpay, banking, other services that you would assume go with a post office and usually some other extra business—for example, it might be in conjunction with a newsagency; it may be that it is a post shop selling stationery, pens, pencils, lime mints or whatever. A good mix of business, along with a family operated post office, will usually make it viable. If a post office does not have a balance but, probably because of its location, has a dependence on one aspect—and it could well be mail—anything that changes the mail situation, whether it is to the benefit or disadvantage of a licensed post office, will impact on the income of licensees. As I am sure you are aware, licensees have all bought their own businesses. They have paid substantial sums of money for them. Mail contractors, whom we also represent, are also seriously concerned because, while they have not invested the same amount of dollars as licensees, they have had to put up a tender for business. If that business, for instance, increases, the tender price does not necessarily increase. So they can be doing a lot more work for the same amount of money. They have also invested in whatever vehicles they are using to distribute the mail. It could range from something as simple as a bicycle or a motorbike through to a huge four-wheel drive vehicle, a truck or, indeed in some instances, a plane or a boat.

CHAIR —I might just ask you a question or two.

Senator MARK BISHOP —Chair, before you do that I might just intervene and ask for some clarification. We had submissions earlier from the Licensed Post Officers of Australia. Could you explain to the committee—or me, in particular—the difference between your organisation and the Licensed Post Officers of Australia? They appear to be much the same to me.

Mrs McGrath-Kerr —It is called competition.

CHAIR —That is an issue that I was also concerned about.

Mrs McGrath-Kerr —The Post Office Agents Association Ltd—POALL—has been in existence for 60 years. We have been representing people who operate post offices and also mail contractors for many years, as you can see. It is not mandatory to become a member of our association; it is purely voluntary membership. For many years we were the only organisation that looked after the interests of people who owned and operated their own post offices. We did have competition in mail contractors. There was a mail contractors association which has now ceased to exist. Something like three or four years ago another organisation was set up—for what reasons I can only speculate, and I certainly would not be prepared to say here today. They represent a group of licensees. There are other organisations which look after the interests of licensed post officers and mail contractors. They are usually more in the form of a buying group but some of them are not. It is clearly very difficult for licensees who are spread right across this country to each individually look after their own interests. I will give you an example. Our Western Australian branch chairman comes from Tambellup. If you were the licensee in Tambellup, you would find that it is not always easy for you on your own to negotiate with the products. So he can see the benefits of joining an organisation where we speak with one voice. Does that help you?

Senator MARK BISHOP —Yes. I was not offering any criticism, Mrs McGrath-Kerr. Are you telling me that there are essentially two organisations that can represent the interests of privately owned and run postal agencies in Australia?

Mrs McGrath-Kerr —There could be 15 or 20. There is no limit—

CHAIR —Are you saying that you are all essentially doing the same business—you all have licensed post officers but there are, if you like, different trade organisations?

Mrs McGrath-Kerr —If you like.

CHAIR —Like not everybody in the medical profession belongs to the AMA?

Mrs McGrath-Kerr —That is right. It is not compulsory to join any organisation, but there are advantages of collective strength.

CHAIR —But are there political differences between you?

Senator MARK BISHOP —I am not interested in the internal politics of the industry or competition or rights to join. I am trying to establish whether there is a difference in substance between the two organisations? That is what I want to establish—nothing else.

Mrs McGrath-Kerr —I guess you could say that we take a broader view, and I guess that is because we have been around for 60 years.

Senator MARK BISHOP —But you both represent the interests of owners/operators of privately run postal agencies around Australia. Is that correct?

Mrs McGrath-Kerr —Yes, and we also represent the interests of mail contractors.

Senator MARK BISHOP —That is fine; I understand that. The reason I ask is that the earlier submission is diametrically opposed to yours. They supported the bill. You have just told us that you oppose the bill so I wanted to find out whether you were a different, or whether you were the same, organisation.

CHAIR —I think that is an important thing to establish. I am interested in the same point that Senator Bishop has just made in conclusion. I want to ask about community service obligations and how you see this bill affecting them. You obviously have a different point of view from the one that was put to us previously about the overall impact of the bill. What would you like to see done to protect the community service obligations?

Mrs McGrath-Kerr —I was privileged to catch only part of the previous submission but I agree with the CEPU representative on CSOs. They clearly have more information than we have. They have access to more information and their resources are greater than ours. I believe that a lot of the CSOs in the postal network are actually provided by licensed post offices and mail contractors. When the NCC held a series of workshops a couple of years ago in relation to competition in the postal sector, community service obligations formed the topic of one of those workshops. I have to tell you that at the end of that workshop I was more confused than when I started so I am not sure that I am any better here today. It is clear to me that CSOs mean different things to different people.

CHAIR —I suppose they do, but it basically comes down to maintaining a service to regional Australia. How do you feel about the ways in which that could be preserved at a level that would satisfy you in the context of this proposal?

Mrs McGrath-Kerr —Currently there are 516 licensed post offices in Australia that get what we call the `top-up', which is an income protection level. It is something that the Post Office Agents Association negotiated with Australia Post when the contract under which our members operate was changed from the Post Office Agency Agreement to the Licensed Post Office Agreement and, because of the change of the structure of commissions, it was clear that some people were going to be disadvantaged. So, to assist them to stay in the industry, it was agreed that this form of income protection, called top-ups, would be put in place but that it would decrease naturally as post offices were sold—that is, the top-up would not be sold along with them. I cannot say that we were madly enthused about the top-up ceasing, because we would have liked to have seen it continue, but it took us a long time to negotiate this particular top-up. I will give you these numbers in just moment.

In June 1995 1,340 LPOs were given a top-up, which cost Australia Post $9 million. That is clearly a community service obligation, forming part of Australia Post's $80 million, or whatever it was, that was given to CSOs back then. That has now decreased to 516 LPOs being paid a total of $3.7 million. I have no problem with considering an income protection or top-up to income on a formula basis to be a CSO; to me, that seems quite logical. How it would operate for mail contractors would, of course, involve a lot of discussion. But this system has been in place successfully for some years, and I would not see any problems with continuing that sort of thing as a CSO for the LPO part of the network.

CHAIR —All right. You also mention the fact that many of your LPOs are manual—they do not have any technology for Billpay or banking services—because they are deemed by Australia Post to be too small to justify the cost of the necessary technology, but obviously the provision of those sorts of services in rural Australia would mean a much better level of service and also answer a lot of other problems in terms of banking facilities and so on. Have you any idea what the cost would be to provide those services, the technology for those sorts of services, to all of your members?

Mrs McGrath-Kerr —In total, no. It would be many millions of dollars. However, this morning, prior to this hearing, Mr Howarth and I met with representatives of the rural transaction centres, the RTCs group, which comes under the auspices of Senator Ian Macdonald, with members of the department and with Australia Post. We spent an hour and a half discussing how technology could be extended into LPOs using the RTC system. It very much looks as though we are getting a result there, so that is extremely pleasing. We do not just say things like this; we actually go out and try to get some results. We have been working on this now ever since RTCs were first mooted but this morning's meeting was very positive, and it looks as though that could see the RTC services, particularly giroPost and EPOS, which is Australia Post's electronic network, extended into some of these post offices with community support. So we have made substantial steps on that this morning so that is very positive. But yes, it would make post offices much more viable, it would give far greater service to communities and it would fill a gap in personal banking when bank branches close.

CHAIR —How are these services provided at the moment? Is it by landline, or by satellite? Do we know?

Mrs McGrath-Kerr —No. You are talking to somebody who does not even know how to work a video recorder. I am sure Australia Post could provide an answer.

CHAIR —That is a technical question I might ask Australia Post.

Senator MARK BISHOP —Just following that line of questioning from Senator Eggleston about your discussions this morning, was that about extending the services offered by the RTCs into some LPOs around Australia? Is that what you were saying?

Mrs McGrath-Kerr —Yes, `in conjunction with' would probably be better, rather than in.

Senator MARK BISHOP —What sorts of numbers are we talking about there?

Mrs McGrath-Kerr —There are between 1,100 and 1,200 licensed post offices which are classified as manual. I notice one of your other submissions said 600 but that is not true. There are between 1,100 and 1,200 licensed post offices that are called manual—that is, they cannot do their business by electronic capabilities. Some of those would definitely be too small to be considered worth while for having electronic. They might do, for instance, one or two Billpays a day. No-one could justify putting in the electronics for that. But of the 1,100 or 1,200 I would anticipate two-thirds would benefit from it, so this is a very exciting thing we are looking at, and we will be keeping on pushing.

Senator MARK BISHOP —When do you think those discussions will be concluded?

Mrs McGrath-Kerr —We have been talking to them now for about 18 months.

Senator MARK BISHOP —There are about 70 operational RTCs around Australia now?

Mrs McGrath-Kerr —No, there are 10.

Senator MARK BISHOP —Ten?

Mrs McGrath-Kerr —Yes.

CHAIR —But more are planned.

Mrs McGrath-Kerr —There are many more planned. We have had 200 inquiries in the last month or so, so yes a lot of feasibility studies will be going on but there are actually 10 in operation. Two that I know of are already in licensed post offices—one in Queensland and one in Tasmania.

Senator MARK BISHOP —And your discussions are going down the path to have the bulk of those RTCs in the future possibly located in LPOs if they are sufficiently large or viable?

Mrs McGrath-Kerr —Or part of their services.

Senator MARK BISHOP —Yes, understood. Thank you for that. Having established that there are two representative organisations in the industry—and yours is a longstanding one of 60 years or more so you have considerable experience in the industry—I want to ask you the same questions I asked the Licensed Post Officers, to be fair. You have said that you oppose the bill. Is mail receipt or mail handling a major component of your POs' revenue?

Mrs McGrath-Kerr —In country areas, yes.

Senator MARK BISHOP —And in non-country areas?

Mrs McGrath-Kerr —No.

Senator MARK BISHOP —Why is that?

Mrs McGrath-Kerr —Because Mr Claven's members service the city areas.

Senator MARK BISHOP —But there is mail handling in city and regional areas.

Mrs McGrath-Kerr —In regional areas, yes; but in city areas it is minimal because there are huge mail centres and there are lots of street posting boxes where people put their box. The main mail that would go through licensed post offices would not be city but would be metropolitan and suburban. Perhaps larger regional areas would be private box mail. LPOs would have private boxes. Once you get out beyond those areas, there are mainly licensed post offices, and mail is a huge component of their income. Mr Howarth could probably talk on that more.

Senator MARK BISHOP —All right. So the revenue issue is a country and regional Australia issue.

Mrs McGrath-Kerr —Yes, sir.

Senator MARK BISHOP —Will some aspects of the bill possibly reduce mail volumes and revenues to members? I will give you three examples: aggregation of mail by mail houses; lower bulk mail threshold with a reduction from 2,500 letters to 300; and under the bill anyone can carry a letter priced at 45 cents. How will each of those central features of the bill impact upon your members and organisations?

Mrs McGrath-Kerr —Because there were no examples given, it is very difficult for us to decide. We have a gut feeling that it will certainly impact, but it could impact in either of two ways. The mail volumes could increase through licensed post offices—and that is all I can speak for—and mail contractors, in which case—

Senator MARK BISHOP —Why do you say mail volumes could increase?

Mrs McGrath-Kerr —I am saying that there are two scenarios. One is that mail volumes could increase. Mail does not necessarily just mean letters: it means things that are delivered by other means at the moment. I am sure that unless you live out in the really rural areas you would know what it is like to come home and find your letterbox stuffed full of things. Mail volumes could increase through post offices, but the payments received by licensees and mail contractors would not necessarily increase. Another scenario is that the companies wishing to access the network could negotiate a rate with Australia Post which would not necessarily be passed on to licensees and mail contractors or may not take enough consideration of the work involved at the other end. Bear in mind that it will all be new and that no-one knows what impact it will have. We are also concerned that in country areas, if another outlet sets up to distribute mail for instance—and it might be in conjunction with a store or a service station or whatever—the licensed post office would lose business and become unviable and you could end up with a couple of unviable businesses in the town instead of one healthy one. We realise that there is a degree of speculation here, but that is because we have not been given enough information to talk on it otherwise.

Mr Howarth —I also own and operate, in a very hands-on way, the licensed post office at Coffs Harbour Jetty in New South Wales. We are concerned, both from POAAL and our members' point of view—and I can speak as a licensee as well—that we can see these other players gaining access. That will come, and that is why my colleague is saying that the mail volumes will increase but we will not necessarily get extra payment for it, because we own the boxes. Licensees own their post office boxes.

Senator MARK BISHOP —Right. Have you had any discussions with the government or Australia Post on this particular issue?

Mr Howarth —Not formal ones, I would say.

Senator MARK BISHOP —Are you intending to have those discussions?

Mrs McGrath-Kerr —If the bill goes through, yes.

Senator MARK BISHOP —The reason I raise that is you have purchased your own business, you have got an asset in the boxes and you are fearful that with the changes in the bill there may be additional competition resulting in direct revenue loss. It seems to me it would be an appropriate matter to raise with government as a matter of urgency. They are legitimate concerns.

Mrs McGrath-Kerr —Yes, we write to them regularly and we visit them regularly. They are very polite to us.

Senator MARK BISHOP —Have you had an adequate response yet?

Mrs McGrath-Kerr —Does one ever get an adequate response? We believe that by continually making them aware of the situation and any changes to the situation it helps them to make better decisions.

Senator MARK BISHOP —You are very diplomatic, Mrs McGrath-Kerr. You told us that there were currently 516 licensed post outlets sharing income maintenance of $3 million. That is about $6,000 average per LPO. Is this income support guaranteed if the bill goes through?

Mrs McGrath-Kerr —No.

Senator MARK BISHOP —Have you sought guarantees from the government?

Mrs McGrath-Kerr —Yes, we have spoken to the minister about this on many occasions. It is Australia Post that pays it and we have spoken to them on several occasions. It is guaranteed while the regulatory climate remains unchanged. Clearly, if it does change, we will be back to the negotiating table with Australia Post and no doubt hammering on the minister's door.

Senator MARK BISHOP —There is fairly significant change in this bill so that would presumably be viewed as a change so you will have to go back and seek continued guarantees for those 500-odd LPOs, won't you?

Mrs McGrath-Kerr —Yes.

Senator MARK BISHOP —What is the future for LPOs? Do you see yourself going down the path of offering new and different services—electronic mail, banking, finance and these sorts of operations? It is almost a continuation of the discussion we had earlier on the RTCs. Is that your future or will it be just purely mail?

Mrs McGrath-Kerr —Mail is the core business, the others hang off it, which help make it more attractive. But mail is undoubtedly the core business of Australia Post and any postal organisation. There are 41 financial institutions part of the giroPost network. That is becoming a major part of business in post offices which have technology, which is why we are keen to extend the technology to other post offices. Licensees who operate licensed post offices and mail contractors according to the terms of their mail contract may take any other business provided it does not compete or conflict with the agreement that they have with Australia Post. It is quite clearly specified in a section at the back of the agreement licensees have with Australia Post what they cannot do. Many mail contractors cart other things to make their mail contract viable, as I am sure you would all be aware. So that adds to it.

Senator MARK BISHOP —Accepting that mail is your core business, one of the significant impediments to your growth or the maintenance of business to your members is access to cable and technology to get into the new world, isn't it?

Mrs McGrath-Kerr —Access to?

Senator MARK BISHOP —Cable and associated technology for data transfer and information transfer is the major issue, isn't it? That enables you to provide the finance, insurance and banking services.

Mrs McGrath-Kerr —Yes.

Senator BOURNE —I am interested in a comment that you made on page 7 when you look at pages 34 and 35 of the bill's explanatory memorandum. You say:

What provisions have been made for Licensees, Mail Contractors and other AP contract workers if AP is sold or partially sold? And what happens to employees?

I think it says in the bill that there are a number of shares.

Mrs McGrath-Kerr —Four hundred.

Senator BOURNE —I cannot really see why there would be 400 created.

Mrs McGrath-Kerr —I cannot either. I would have thought one was enough.

Senator BOURNE —Yes, and I do not think there is any reason not to have one, unless there is a reason we do not know about not to have one. What do you think the impact would be on your members if there was privatisation or partial privatisation if some or all of those 400 shares were sold?

Mrs McGrath-Kerr —We would have to assess the situation, but we may seek to have the LPO agreement, for instance, declared null and void because it was made with another party. As you are aware, when one company buys out another, often contracts continue, but it would depend on the circumstances. If there were major changes, we ourselves would be looking at major changes. It may be that a purchaser, if they became a major shareholder, might decide to close half the post offices in the land. Who knows? You cannot say. Their form of rationalisation might be completely different to the Australian government's. Another aspect is that our members have made their contract with Australia Post, not with someone else. We were concerned at the thought of 400 shares. If it had been one share held by the government we would not have those concerns, but 400 shares did concern us.

Senator BOURNE —It does seem a bit odd to me too, I must say. That was the only question I had that has not been covered.

Senator TCHEN —In answer to Senator Bishop's question, you said that you are opposed to this bill. I was reading through your submission and I got the impression that basically most of your concerns, in fact the vast majority of them, could be covered under your licence condition with Australia Post, with a variation of that, which is very similar to the other association's position. But they came out and said they had no concern and you came out and said you opposed it. I want to get clear in my own mind whether your position is the die in a ditch, blood on the floor type of opposition or there are changes you want to make and if changes are made you would look at it again. Which type of opposition are you talking about?

Mrs McGrath-Kerr —I do not think I would die in a ditch for anyone, never mind a bill. If the bill went through with or without amendments, clearly our job would be to negotiate with Australia Post and government to get the best conditions for our members.

Senator TCHEN —Even before that, it could be amended in the Senate.

Mrs McGrath-Kerr —Yes. We would be using our best endeavours to get the best results for our members. Our articles of association say that our organisation is here to protect, preserve and promote the business interests of our members, so that is what we do at all times.

Senator TCHEN —That is why you are here.

CHAIR —We understand that you are here for that purpose.

Senator TCHEN —You also make the point early in your submission that you believe that the licensed post offices actually carry out most of the CSOs.

Mrs McGrath-Kerr —In their areas.

Senator TCHEN —At the moment you think the bill does not do that. Supposing the bill actually requires Australia Post to negotiate with you to enable you to carry out those CSOs and further on the government provides enough resources and support for Australia Post to meet those requirements, you would have no problem with the bill?

Mrs McGrath-Kerr —I do not think I would quite go that far, but we would certainly negotiate with Australia Post on that particular issue. I would suggest there would be some pretty heavy discussion as to where the cut-off point was.

Senator TCHEN —You have no opposition to the thrust of the bill, to the direction of the bill?

Mrs McGrath-Kerr —We would prefer the status quo. We are happy with the way things are at the moment in regard to the postal network and we really do not see any necessity to change. If it does, it will be beyond our control and we will work with whatever comes up.

Senator TCHEN —And you think there is no room for improvement in the existing arrangements, in the service to the community?

Mrs McGrath-Kerr —I believe that the service is improving all the time. It is about 30 years since I first bought a post office, and I can assure you that things have changed dramatically in that time. But they did not change overnight. If you compare 30 years ago with today, there is a massive change, but it happened a step at a time. I think that surveys show that the public are very happy with the service that they get from post office, but that does not mean that it cannot improve. There was always room for improvement.

Senator TCHEN —Thank you, Chair. I will not challenge Mrs McGrath-Kerr's expertise on the ground.

CHAIR —That concludes the questions that senators have for you, so we thank you for appearing here this morning.

[12.01 p.m.]