Australia / Analyst Insights
Declining mail volumes have contributed to stamp price increases
by Lauren Magner
Mar 15 2016

Declining mail volumes over the past five years have led Australia Post to increase the price of stamps from 70 cents to $1.00 from January 2016 onwards. Mail volumes have declined each year from a peak in 2008 as email, social media, text messaging and phone calls have replaced postal communications. As a result, Australia Post has successfully lobbied the ACCC for stamp price increases. Postage first increased from 50 cents to 55 cents in 2008-09, and has risen three times since to reach $1.00 in 2016. However, growth in parcel deliveries has offset lower mail volumes and provided expansion opportunities for the Postal Services industry over the past five years.

Australia Post is the only dominant player in the Postal Services industry, contributing over 90% of its overall revenue. Providing standard letter services is regarded as a social obligation, which is why Australia Post is regulated by the ACCC. As the company has a virtual monopoly, it must obtain regulatory approval for reserved service price increases. Its network is extensive and costly to maintain when not operating at full capacity, and this has led to growth in parcel delivery as Australia Post attempts to offset declining mail volumes. As a result, revenue for the Postal Services industry is expected to increase at an annualised rate of 1.9% over the five years through 2015-16.

Parcel delivery volumes have increased due to more Australians shopping online, more Australian businesses having an internet presence, and private buyers and sellers using postal services for exchanges on platforms such as eBay and Gumtree. The Online Shopping industry has grown strongly in recent years, with revenue expected to increase by an annualised 16.5% over the five years through 2015-16. This growth has led to increased demand for convenient and efficient parcel delivery networks. As a result, retailers have developed a variety of parcel delivery methods to make it easier for consumers to collect packages, including click-and-collect, parcel lockers and parcel collect.

Stamp prices are anticipated to continue increasing over the coming years and the Federal Government will likely loosen Australia Post’s Community Service Obligations as the Postal Services industry’s letter delivery segment continues to incur significant losses. Other potential methods to ensure Australia Post’s profitability include reducing the frequency of regulated services and introducing a two-tiered delivery system with higher fees for more frequent services. Meanwhile, the Online Shopping industry is expected to continue growing rapidly. Improved internet connectivity across various devices will help increase the average amount that customers spend online, which will drive further demand growth for parcel delivery and postal services. This means that despite expected declines in letter delivery services, revenue for the Postal Services industry is forecast to continue rising over the next five years.

 

Relevant industries:

I5101 – Postal Services in Australia 

X0004 – Online Shopping in Australia