Flat White

Forget the Cartier watches. We should be talking about privatising Australia Post

30 October 2020

12:30 PM

30 October 2020

12:30 PM

Australia Post CEO and managing director, Christine Holgate, has been caught between the conflict of running a government business enterprise and having to run it as an effectively fully-fledged private sector commercial entity – and every politician knows this. 

Her problem was that the Cartier watches bought as a reward for four senior executives who clinched a deal with banks that further secured the finances of Australia Post brought into glaring light the reality that all know: Australia Post is first and foremost a commercial business — as it must be to be selfsustaining. 

But the optics of this created a problem for the government who knew that gift of $5000 watches would not sit well with the public who still see Australia Post as simply a mail delivery service and not much more.  

Despite this, a quick glance at Australia Post annual reports show why Australia Post must work a commercial entity. 

The raison d’etre for Australia Post, the original reason for why it was established, is fast disappearing. People and businesses just don’t post letters as much as they used to. 

Over the past decade the volume of mail has been more than halved from 5,150 billion articles to just 2.4 billion in 2020 — and that is while delivery points have increased to 12.3 million places. 

Snail mail now accounts for $2 billion of Australia Post’s revenue of $7.5 billion, but it continues a decade long loss-making trend with a deficit of $241 million in letter losses. 

And that is the nub of the conundrum for every Australia Post CEO.

To sustain its loss-making snail mail service it needs to broaden its business and it has been doing so since Ahmed Fahour, the former CEO of the National Australia Bank, took over in 2010 and began his Future Ready programme to reposition Australia Post by expanding its activities and putting it on a more commercial footing utilising his banking business acumen.  

Mr Fahour introduced not only a restructure and repurposing of Australia Post, but also a new commercial culture.  

And while still a government business enterprise the commercial aspects of how it ran overtook the 200-year-old culture and purpose. 

This is the environment into which Holgate stepped in October 2017 when she was appointed as MD and CEO after a nine-year stint with vitamins group Blackmores – a government business enterprise being run on commercial business lines. 

By the time Holgate was appointed Australia Post had culturally moved far beyond that of a corporatised GBE to that of a private sector company operating under the legislative structure of a GBE. 

It is clear that she didn’t quite grasp the true nature of this hybrid commercial/GBE business and the politics of it. 

As a commercial operation it makes sense to reward success particularly as it helps secure the future financial viability of Australia Post which means it can maintain its core service of mail delivery. 

But giving Cartier watches to executives of a GBE was beyond the political pale and once it became known, as it inevitably would, politicians would have to respond to assuage public anger. 

And her claim that it was not taxpayers’ money, but shareholders’ money further revealed her lack of understanding. It is taxpayer money and there are only two shareholders – the Minister for Finance and the Minister for Communications. 

And media reports that Holgate spent $34,000 on hotel accommodation between October 2017 to July 2018 further rankled the public and Canberra politicians. 

The government need to act and has implemented an inquiry into the gifts and said Holgate should step aside whilst the inquiry was underway 

You only have to review the furore over the exorbitant pay of her predecessor, Mr Fahour, who was paid $5.6 million in 2016 to understand this.  

It is worth noting that the Australia Post board recognised this and Holgate’s pay is a fare more modest, but reasonable $1.4 million to run the $7.5 billion business. 

In the private sector Holgate’s salary, accommodation expenses and the presentation of watches as a reward for a successful deal that cements financial viability would have gone without comment, but the public and politicians have expectations for the management of  GBE that do not apply to commercial organisations. 

The simple fact is that Holgate has a political tin ear and clearly didn’t understand the consequences of her actions and responses to the public.  

Subsequent comments by her lawyer, Bryan Belling of Kingston Reid, to the media only serve to show that Holgate’s is deaf to political reality and will do nothing to serve her or Australia Post’s interests unless those interests are now so divergent that a rapprochement is not possible. 

Belling was reported today as saying: “It is now exactly seven days since Ms Holgate was the subject of a humiliating answer during Question Time. In that time Ms Holgate has not had any proper notification that she has been stood down from her role, nor has she been informed as to why she should be stood down, nor has she had any communication regarding … the investigation into Australia Post from either the board or the government. 

“Legally, in my opinion there are no grounds for Ms Holgate to be stood down, and ‘optics’ is not a legally valid defence.”  

Australia Post has rejected this suggestion and in a statement said they had been communicating with their CEO. 

The depressing thing about this sideshow, and it really is a sideshow, is that it distracts from the reality of what is happening to Australia Post. 

Its core business of snail mail is in serious decline and its downward trajectory will only accelerate and losses for this service will continue to rise. 

It is only the parcel business that is keeping Australia Post afloat financially with a revenue growth of 17.8 per cent. The parcel business accounts for more than half of Australia Post’s revenue. 

Over the past financial year non-letter revenue grew by 15 per cent and now accounts for 73 per cent of the groups turnover. 

The organisation can also boast a network of more than 4000 outlets across the country offering multiple retail and licencing services from government departments, banks and other agencies other than just postal services. 

It is clear from this data that Australia Post has substantially outgrown its original business of delivering mail. 

During the pandemic, it sought from the government temporary changes in letter deliveries from daily to every second day. This will continue until June 2021 when it will be reviewed. 

There are no surprises for guessing that when it is reviewed it will become a permanent feature. 

These are the issues that the government should be really focussed on, not Cartier watches, but the future of Australia Post as its raison d’etre – snail mail – continues its inexorable decline. 

The real future of Australia Post lies in its privatisation.  

It could readily be sold and should be before its reason for existing disappears. 

As it is, it is competing with the commercial sector in parcel delivery and other commercial services simply to pay for mail. 

This is not a viable long term scenario. 

In the meantime, the government should merge auDA, the Australian Domain name operator, with Australia Post to build on synergies. 

auDA currently has 3,180,000 domain names it manages under the .au umbrella with virtually all having emails.  

In the past six months from April to September, there has been a 31 per cent growth in the number of domain names registered compared to the same period last year. 

Approximately 90 per cent of Australians now use the internet and have access to email via it. 

Email, not snail mail, is the future.  

The merger of auDA and Australia Post would complement the growth of e-commerce across the country and make Australia Post a very attractive float. 

Got something to add? Join the discussion and comment below.

Show comments