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Tuesday, 7 May 1968

Mr CREAN (Melbourne Ports) - This is the third Bill of a series dealing with the Post Office and its allied undertakings, and in some respects many of the arguments were traversed in the debate last week. However, in the first place I intimate that the Opposition does not oppose the Bill. Like the Postmaster-General (Mr Hulme), I believed many years ago when we were serving together on the Public Accounts Committee that it was a rather silly arrangement for the Budget to be inflated on both sides - on one side showing all the revenue of the Post Office from such things as postage and telephones, and on the other side showing the details of expenditure for the same services. We believed that, in essence, what should have been shown were the net profit and loss figures and the applications for capital. As I understand it, that is the purpose of the Bill with which we are now dealing. Indeed, when the Minister introduced the measure he gave us an example of how, in future, the items will appear - in what he called a single line item, with the appropriation in the Budget being the difference between expenditure on capital works and operating costs on the one hand and, on the other hand, 1 believe the Minister implied that this would not in any way lessen the ability of members to criticise the operations of the Post Office or to seek information upon its operations, either during finance debates or during question time.

It is rather peculiar how the finances of the Post Office have operated since the passage of the original Post and Telegraph Act in 1901, when the Post Office was one of the items of administration taken over from the States. It was recognised at that time that this was a branch of administration that would be better handled on a national, federal or Commonwealth basis, rather than having six separate State Post Offices.

The provision that seems to me to govern the finances of the Post Office is contained in the simple section 65 of the Post and Telegraph Act 1901-1966. The section reads:

All moneys collected on account of the sale of postage stamps commission charges fees penalties and other dues levied collected or received under this Act or the regulation shall be paid to the Treasurer of the Commonwealth and placed to the credit of the Consolidated Revenue Fund: Provided that fines inflicted upon officers of the Department under section ninety-five shall be disposed of in such a manner as the Governor-General shall direct.

Apparently there was some separation of the moneys in relation to disciplinary charges; otherwise everything went into the Consolidated Revenue Fund. It is interesting to see, from that section which apparently was adopted from section 132 of the Queensland Post arid Telegraph Act 1891,. how simple the Post Office was in those' days. All that was referred to in that section was the sale of postage stamps, commission charges, fees, penalties and other dues. No mention was made in those days of the telephone and scarcely was mention made of the telegram. Certainly nothing whatever appeared about television and broadcasting. - Now, it is proposed to. insert a' new -financial clause into the Post and Telegraph Act. I refer to. proposed new section 96a, which appears as 'Part IVa.- Finance'. I commented the other evening that it is rather odd to find where this proposed new section will .be inserted. Section 96 of .the Act reads:

Any person employed under the authority of the Postmaster-General may refuse to receive ' or transmit a telegram containing blasphemous indecent obscene offensive or scandalous matter in its contents address or signature.

Immediately after section 96 will be inserted proposed new. section 96a in a new part of the Act entitled 'Part IVa- Finance'. I think that in many respects it . is rather absurd that such an insertion needs to be made in this way. Some provision ought to be made for renumbering the sections of Acts or for allowing such provisions to be inserted in their own right, as it were, and in this case certainly elsewhere than between a section dealing with obscene telegrams and a section dealing with regulations in general.

Be that as it may, it seems to me that the interesting part of the amendment is proposed new section 96h. This section provides: (1.) In the administration of this Act in relation to the Post Office services, the Postmaster-General shall pursue .a policy directed towards achieving in respect pf each financial year, in respect of those Services, such financial results as the Postmaster-Genera], with the concurrence of the Treasurer, determines.

It is about this matter of the overall financial result of the Post Office that I wish to have something to say.

I remember that in the days when this matter was discussed by the Public Accounts Committee what is now the Se letter rate was 2id or 3d. I recall asking the question: Why was it thought that a letter should cost 2id or 3d? Why was it thought that so many ounces of airmail should go at one rate and that so many pounds of parcels should go at another rate? Why were concessions given on certain classes of mail, telegrams and so on? One was always forced back to the answer that this was a matter of government policy. I think that everybody realises that even though in a fine analysis it may be regarded as a matter of government policy nevertheless some attention was paid to what were called the overall results of the Post Office on a commercial basis. I think that the Post Office, like any other undertaking, hopes by virtue of all its transactions to have enough money from its revenues to meet its costs. Whilst actual charges were a matter of policy, apparently the matter of matching revenue and expenditure was what called for the exercise of ingenuity by the Post Office.

When the Minister introduced this measure, he seemed to suggest that what is being done will provide for the first time the Post Office with a business charter. I am quite sure that he did not mean in any sense by that statement that in earlier years the Post Office operated in an unbusinesslike fashion without what he calls a business charter. I am a great admirer of the Post Office and its efficiency. I am also one who does not believe that earning a profit should be the only criterion or determinant of efficiency. I think that there are other ways of measuring the efficiency of an organisation than by establishing whether or not it makes a profit. After all, making a profit simply means charging more for the services performed than those services cost. The argument whether that difference can be elevated to a virtue and then called efficiency seems to me to have a lot of undistributed middle term in it. I submit that there are other ways than making a profit to determine whether an undertaking is efficient.

I concede that what the Minister raid is that the new method will enable the Post Office to be somewhat more flexible within its financial arrangements. Again, flexible is a term that lends itself to a certain amount of elasticity, I suggest, but an organisation can be flexible wide or flexible narrow. I hope that the Post Office will be flexible narrow rather than flexible wide. 1 wish to relate my remarks to proposed new section 96h because the other evening the Minister took me to task when I suggested to him that he - not my side of the House - made a reference to the 8% net earning to which the British Post Office works. I notice that the latest broadsheet from the Department of Economic Affairs in Great Britain, No. 36 for January 1968, is devoted to the subject 'Guidelines for the Nationalised Industries'. Whereas the Post Office is supposed to earn 8% net generally, the publication in a footnote points out:

New targets for the Post Office have recently been set: For postal services, 2% surplus on expenditure (after depreciation and interest), and for telecommunications, 8i% on net assets (after depreciation at historic cost).

What I had pointed out- -and this argument was raised during the debate upon whether the Post Office should be reconstituted not as a government department but as some new breed of animal called a corporation, to which the Minister suggested by implication that such a corporation might be expected to earn 8% net - was that already the Post Office was being forced to earn 5% net or, to be more precise, 4.983% net. In his reply - of course I do not have the right of reply in a debate as the Minister does - he suggested that this was not quite true because the Post Office had actually made a loss of about $21 m, and therefore, in essence, the Post Office had not earned the 5%. With all respect to the Postmaster-General, I suggest that this is really a bit of a quibble because after all he has already altered the charges pf the Post Office so that that $21m loss will be converted into at least a breakeven figure. The objective will still be to allow the Post Office in terms of capital employed in it to have a net return of about 5%.

I want to point out what might be called a certain amount of cross-financing which goes on in regard to Post Office charges.

During the current session my colleague, the honourable member for Stirling (Mr Webb), has asked questions 689 and 703 relating to the overall results of the Post Office. I think these questions were mentioned by the Leader of the Opposition (Mr Whitlam) the other evening. In reply to these questions the Postmaster-General said as reported at page 790 of Hansard of 4th April:

1.   The losses incurred in 1966-67 on the four domestic mail categories are estimated to be:

Letters . . . . $1 million

The Post Office almost broke even with revenue of about S70m and handling costs of S71m. The Postmaster-General continued that other losses were estimated as follows:


This made an aggregate loss of $20m. I think the latest accounts show that on a commercial basis these losses amount to §21 m. The Postmaster-General also stated in answer to the question asked by the honourable member for Stirling:

2.   The new postal rates introduced on 1st October 1967 are estimated to increase annual revenue as follows:


It can be seen that this gives an increase in revenue of about $24m as against the losses of $2lm. Of course, there may have been some adjustments in costs, but that is not the point I wish to make at this stage. I am suggesting that the ordinary letter service of the Post Office that almost broke even is to cost the public another SI 6m. In my view, this indicates that this section of the undertaking will make a profit and that that profit will be used to subsidise some other activity of the Post Office. This is what is called cross-financing. I would like to say a few words about this subject. It seems to me that in statements issued from time to time by the PostmasterGeneral and the Government we should be given some information about this crossfinancing.

A colleague of mine from the Geelong district was disturbed the other day to find that some alterations that were being made in a kind of telephone exchange that was being installed in the district were to cost about $50,000. Although about sixty subscribers were not asked to pay any part of this $50,000, nine of the subscribers were asked to pay a bill of $15,000 between them. One subscriber was asked to pay $2,000. I would like to know something about the logic of this kind of system. A certain amount of cross-financing must have taken place because apparently $35,000 of the $50,000 was to be paid by all users of the Post Office, but nine unfortunate subscribers were asked to pay $15,000 between them. This is only one example of cross-financing. It may be that other honourable members know of further examples. I do not believe that the bulk of users of the Post Office services should subsidise these services of a particular section. However, I suggest that this practice is followed to a certain extent. It seems to me by implication that a fairly heavy dose of it will be financed by users of the ordinary letter service. . .

Mr Katter - It is a matter of developing the country.

Mr CREAN - That is right. But I think if subsidies are paid to develop the country then the subsidies ought at least to be revealed so that we can know what is being paid.

I also believe that some sort of logic ought to be advanced as to why a person should be expected to pay additional costs simply because he lives a certain number of miles along a road. I am sure such a practice does not appeal to members of the Australian Country Party. I have listened at great lengths sometimes to the honourable member for Mallee (Mr Turnbull) who I often think represents vacant miles and cows more than he represents people. Nevertheless there is quite a considerable distance between the people he represents. It is a little illogical and unfair that such people should have to carry heavier burdens than others for a telephone service. It would be interesting to hear some sort of explanation, perhaps not in this debate but at some other time. I suggest that the proposed White Paper be a little more discursive about the financing of the Post Office. Some observations in the report of a Public Accounts Committee inquiry of 10 or 12 years ago suggested that the governments would be happy, as I am sure the managers of the Post Office would be happy if, at the end of the year they found, like Micawber, that they had had £1 and spent 19s lid, rather than that they had had £1 and had spent £1 0s Id. They like their expenditure and revenue to balance as far as possible. It seems to me, without any doubt, that some profitable aspects of the postal services have subsidised other aspects that have been unprofitable.

I think one of the greatest beneficiaries from the losses incurred by the postal services are the members of the Press. They could send telegrams at a cheaper rate per word than anyone else in days when they did hot have their own teleprinters. They were able to make trunk-line telephone calls at cheaper rates.

Mr Hulme - The newspapers still do.

Mr CREAN - Yes. This was said to be a necessary subsidy because the dissemination of the latest information was regarded as a public service. I do not quarrel with this. But if these accounts are to be presented in a new fashion and we are told that they are based on a commercial rather than cash basis, then I think some notes should be contained each year in the accounts of the Post Office drawing attention to the fact that certain operations of the Post Office can more than cover the costs incurred. I can see, as every economist knows, that assessments of joint costs are pretty arbitrary. If we pay one man to do. ten separate tasks, how do we allocate his total wages among the various tasks to give the true cost of every task? Nevertheless, tests and canons can be applied which would show that some forms of the service do more than pay for themselves and, if I can be excused for the term, make a profit. Others make a loss. In my view, attention should be drawn to this. We should have an explanation about how charges for telephone services are imposed on certain users depending on whether or not they live certain distances from the exchange. If this were done then a lot of people would not be so confused about the situation. As I say, I hope that we agree broadly that this legislation simplifies the present structure of the Post Office. I hope that it makes the Budget a truer picture of overall results, rather than just putting everything into it and then taking some items out. It is a net performance rather than a gross performance.

I hope too that the flexibility which is to be given to the Post Office will be of the narrower type rather than the wider type and that it will enable the Post Office to apply tests of efficiency that previously it was not able to apply. I hope that the tests will not be based purely on financial results. I still think that there are better ways of organisation and management, which are part of efficiency, than the confusion, sometimes, of a mere debit and credit transaction. I look forward to the White Paper as an additional document at the time of the presentation of the Budget. I trust that the Minister has noted some of my reservations as to what information should be included in the White Paper in order to achieve a new and intelligible presentation of the accounts.

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