More than 3,500 small business post offices under scrutiny as Australia Post prepares for bruising financial loss

Australia Post will soon assess the viability of more than 3,500 post offices run by small businesses or individuals, as the mail carrier stares down the collapse of its letter operations and difficulties meeting the needs of a rapidly digitising economy.

The postal service, which is owned by the Commonwealth but operates as a standalone business, revealed its financial struggles on Wednesday in a new consultation paper.

After booking a record $189.7 million loss for its letter division in the first half of the financial year, Australia Post now expects its overall business to record a loss for the first time since 2015.

“Businesses and government send more than 97 percent of letters in Australia but are increasingly using digital communications channels, with the average household now receiving approximately one-third of the number of letters each week compared to 2007-08 when letter volumes peaked,” the paper says.

Beyond the precipitous decline in letter postage, the paper addresses the cost of Australia Post’s Community Service Obligations — the legislated rules ensuring Australia Post not only provides a letter service but makes it affordable and reasonably accessible to Australians across the map.

As it stands, Australia Post performance standards call for letters to be delivered to 98% of delivery points five days per week.

“The estimated cost of these Community Service Obligations was $348.5 million in 2021-22,” the paper says.

“The existing Community Service Obligations are no longer financially sustainable and are not well targeted at the needs of Australians due to changes brought about by the digitisation of the economy.”

The consultation paper will inform the modernisation of Australia Post, Minister for Communications Michelle Rowland said in a statement.

Community feedback will “support the long-term financial stability” of Australia Post by helping it “adapt to changing consumer trends,” she said.

Beyond the growing financial hole in Australia Post’s letter business, the consultation paper also calls for feedback on the operation of its Licensed Post Office (LPO) and Community Postal Agency (CPA) systems.

Outside of the post offices owned and operated by Australia Post, small businesses operate thousands of LPOs outside of major metro and suburban regions, often in conjunction with newsagents, pharmacies, or grocery stores.

Increasingly, rural postal operations are acting as de facto banks, offering cash deposit and withdrawal services in the wake of traditional bank branch closures.

Maintaining those services is important for Australia Post to meet community expectations, the organisation says.

“Outside of metropolitan areas, most Post Offices are LPOs and CPAs, and these outlets are an important service hub for their communities, supporting other small businesses and keeping communities connected,” the paper says.

Given their importance, the government says it remains committed to “providing appropriate coverage of the Post Office network, particularly in regional and rural areas, and supporting LPO and CPA financial sustainability.”

However, the cost of running those services is also under scrutiny: the operating cost of Australia Post’s LPO network hit $536.6 million in the 2021-2022 financial year.

The Post Office Agents Association Limited (POAAL), which represents small businesses operating LPOs, says it will closely watch any developments to arise from the consultation process.

“Change is constant in the postal sector, and I’ve experienced plenty of change during my time in the postal sector,” POAAL director Bob Chizzoniti said in a statement.

“POAAL understands that the Federal Government and Australia Post want to take action in response to the decline in the traditional letters business, the growth in parcel volumes, and changes in customer behaviour.

“We will scrutinise whatever is put forward and make sure our members’ interests and concerns are heard.”

The consultation period will close on April 27.