Senate Environment and Communications Legislation Committee [Part 2], , 3:20:56 to 3:26:38
Officials clarify financial figures regarding 'reserved letters' and the drivers of losses in the mail business. Senators challenge the justification for stamp price increases given the reported profits in specific postal segments.
Topics: Cost recovery, Government spending
Speakers: Senator Sarah Henderson, Mr. Paul Graham, Unknown Speaker
>> Uh can I ask about the reserve letters? So reserve letters ordinary mail >> uh made a $ 48.9 million profit. I'm looking at page 183 of the annual report. So Australia Post often refers publicly to letters, losses, but it's referring to products other than the regulated mail service. That's right.
>> Uh it has a combination I think uh Senator 183.
>> So the reserve letters made $8.9 million profit.
>> Yeah.
>> So So what so when you talk about letters losses, what losses are you talking about? Because the ordinary male is still making a profit. Letter losses,
Senator, according to 183, is a loss of $63.2 million.
>> Yes, but the reserved letters made a $48.9 million profit.
>> Uh, that's not on that page, Senator.
>> Well, maybe you're looking at a different page to me. I'm looking at page 183.
>> Shows a re revenue of 1.825 825 billion, an expansion of 1LE8 billion and a loss of $63.2 million. That loss was significantly less in the prior year. You're correct in that assumption and that was primarily due to us managing costs very carefully, but also obviously the increase in the stamp price.
>> I'll come back to you on that. So, so is that not correct that the ordinary I'm talking about the ordinary reserve
>> Uh, I'll have to look at what page that's actually on, Senator. Yeah, maybe >> I can have my
>> Why don't we Why don't we come back to that if that's if that's okay. >> Uh, so the annual report combines parcels with other services. So are you able to give us the breakdown on the parcels business on its own?
>> Uh, Senator, we don't provide the individual breakdown of those businesses. What we do is show the the revenue. Uh, we have a um cost allocation methodology. uh but uh the actual uh bottom line or EBIT uh of the parcel business is not recorded separately in the annual report
>> but but but I'm seeking that information.
>> Uh we can take that on notice, Senator.
so I'm just sorry I'm just having a further look at the reserve letters. There's a footnote $48.9 million profit total letters $63.2 million loss. So the residual non-reserved letters, international letters and small packets uh I assume is responsible for that
>> Uh there are a number of things and there obviously uh unadressed mail is also significant loss maker. Uh we provide obviously a discount to charities. We provide um cheaper stamp price to uh um people on the pension for example. So uh as you know there are a number of different products within our mail business.
>> Yeah. So, I'm just if you look at the footnote on page 183, you'll see the reference to the $48.9 million profit. >> That's in the footnotes, Mr. Graeme. >> So, so when you talk about total letters as a loss making activity, we're not talking about ordinary reserved letters. So, what's causing those losses then?
Uh well the losses are from uh ordinary uh mail. Uh we also have as I says
>> no not not ordinary mail ordinary mail are reserve letters. That's a $48.9 million profit. And then total letters there's a $63.2 million loss. So it looks like the residual is therefore responsible. So I'm talking about non-reserve letters, international letters in small packets is therefore responsible for about a $112 million loss.
>> Uh that would be right in terms of the calculation. Uh
>> can you provide more detail on this?
We'll provide you with a breakdown. This
is a really significant issue because Australia Posters frequently talk about letters losing money but and and using that to justify incre increases in in stamp prices but yet when we look at the breakdown Mr. Graeme, the reserved letters, the ordinary letters that we post put the stamp on, they're actually making a profit for Australia Post.
>> A lot of it is to do with the way we allocate costs, Senator. So, it's not a straight, it's not a straight line in relation to saying that product actually makes money. We have a very complicated cost allocation methodology. And the way we allocate cost, hang on, but let's not
breakdown. Reserved letters, $48.9 million profit. So I mean the cost of living for so many Australians is a massive issue. Every time the cost of stamps goes up and postage uh this is a further burden on Australians. So I'm just saying very clearly that I'm pleased to see that reserve letters are leading to a profit. Um, but if you could provide more detail on what is driving those losses of about 112 million, uh, I'd be I'd be really really
>> Happy to take that notice, Sandra. Just for uh uh value the um the average uh household consumes about 6 to8 stamps a year and therefore the cost increase and the last increase whilst any cost increase is obviously uh you know uh going to hurt uh it was about a dollar to the average household peranom.