Australia Post chief executive Ahmed Fahour is on tenterhooks as the May 13 budget looms and the Abbott government prepares to release the Commission of Audit’s report on how to make the government leaner and more efficient.
The report and the government’s response to it could be a game-changer for the business that Fahour runs. What he has described as a ”win-win” would see Australia Post’s role as provider of government services expanded significantly, cutting government service delivery costs and giving Australia Post new income to offset growing losses on its mail delivery service. Australia Post lifted net profit by 11 per cent to $312 million and paid the Commonwealth government a dividend of $244 million in the year to June 2013, but the profits all came from an unregulated part of its business, express delivery services notably.
Its regulated mail business lost $218 million, and Fahour told a Senate estimates committee hearing in February that the decline in letter volumes was accelerating, and likely to push the group onto losses in the June half this year for the first time since its corporatisation in 1989.
Australia Post is already a major agent for private sector companies and government agencies, processing payments and documents for more than 750 entities, including passport applications, land title transactions and licence renewals.
In a submission to the Commission of Audit, the group has argued, however, that its coverage could be expanded to include other government services and payments, including ones currently delivered by the Department of Human Services and its main retail ”face,” Centrelink.
It would be radical expansion and one that would not be without execution difficulties. In appearances before the Senate estimates committee, Fahour was grilled by Labor senator Doug Cameron about Australia Post’s qualifications to expand into areas that involve case management, for example.
The commission’s report and the government’s initial response to it will be released before the budget. The commission was asked to find ways to cut service delivery costs and end duplication, and the private sector provides a template.
Many large companies have already consolidated service functions that existed inside separate divisions into single ”shared services” operations that each division accesses. Similar changes inside the government would be sweeping, and Australia Post is a potential services supercentre for the government because it operates Australia’s largest retail network, with more than 4400 outlets, including more than 2500 in rural areas.
The devil would be in the detail. Service quality would need to be maintained or improved, Australia Post would need to be more profitable in its expanded form than it is now, and the government would need to pay less for service delivery than it is paying now. The mix of user and government fees Australia Post received would be up for debate.
In committee appearances Fahour has made clear, however, that he believes the idea deserves serious consideration.
Asked last November by Senator Cameron what the group would tell the Commission of Audit, Fahour said Australia Post would ”put forward what we are good at, what we are capable of doing, what we know we can do to both businesses and to governments”.
There would be work needed to assess what was possible, he said, but ”if we are going to undertake some relevant services over the counter in our post offices for the community Australia-wide, we would have the right technology that interacts – like we do today, say, with 71 financial institutions”. The group would tell the Commission of Audit ”what our strengths are, what our capabilities are, where our position is and what we have as a platform”, he added.
In a second appearance before the committee in February, Fahour said Communications Minister Malcolm Turnbull and Finance Minister Mathias Cormann had been briefed by Australia Post about its submission to the commission. There were a range of services Australia Post could perform and ”we wanted to make sure that we put the best foot forward”, he said.
Turnbull, for his part, told a conference last month that while Australia Post and its post offices faced ”big existential challenges” as postal volumes declined, the viability of post offices could be addressed by using them to deliver ”better government services”. They included Medicare and Centrelink services, he said, although there were ”limitations in terms of expertise”.
Australia Post was tagged as a privatisation candidate after the Coalition’s election win in September. A move to significantly expand its operations would probably see any sale plan deferred. When the job was done, however, Australia Post would be more profitable, and more saleable.