Could Britain deliver Abbott a red-letter day?

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Whilst Mr. Fahour may be investing in growth, and those investment decisions may be sensible for private market participants, I think that he is acting outside of his mandate.

Why should a government owned monpoly (on letters), be expanding into private and non regulated markets. If the 'post' is an essential service, which the government requires control over, delivering packages bought on the internet does not align with the 'essential service' imperative.

Given the loss making regulated snail mail business is in terminal decline, the government will have trouble finding a buyer for that bit... pre internet time was the time to privatise..

It would be like Telstra trying to privatise the Yellow Pages now... they would have to pay someone.. a lot... to take it over.

Keyser not sure parcel and letters delivery is a monopoly, but agree "delivering packages bought on the internet does not align with the 'essential service' imperative" ...Australia post wanted probably to compete on this one with private interests to protect its own, or was it on government pressure to keep an eye for potential taxes, who knows.

Our problem is to lower the cost of single item delivery around the world at least to a cost lower than the price of the item itself!

Francois.. I think we are in vigorous agreement.

Acting as a private business would, Australia Post has looked to offset its losses from its legacy letter delivery business, with other growth businesses...

Not only parcel delivery, but they do bill payments, banking, gift shops.. all sorts of stuff...

The primary question should be... WHY?

Stick to the 'essential service'.. if it loses money.. well so be it, that's why the market participants won't do it.. but make sure the service is as efficient as possible, so as to limit taxpayer loss.

What will the private owner of snail mail do to that business? Increase prices? Reduce services? Get rid of it? Much like privatised power stations we will not see a reduction in costs, just a reduction in service and reliability

I don't know how there could be "a reduction in service and reliability".
In recent times the letter delivery resembles a lucky dip - will I pull out letters for us or will they be for any of the nearby neighbours? As for parcels, if it requires a signature it's often left on the doorstep yet if it doesn't then AP leaves a card and I have to go down to the post office to pick it up.
I've tried complaining.... but you can guess what was the response. The level of service is similar to the ATO's, but that's another story.

Interesting article,
Australia needs to multiply nodes downunder and have a major strategic alliance with a big overseas transport delivery firm to bring down transport cost to a point where once optimised grouping applies sending one item to China or Holland for example does not cost more than the item itself.

China comes to mind because they own a lot of transport infrastructures.

The winning strategy is the grouping of the shipped items into cost effective deliverables.
On single item delivery our cost of delivery are four to five times the cost some businesses in Europe and China have to pay for, it must be extra cost from an unoptimised process of grouping items into container or other clusters etc...

Both UK and Australia do not have a monopoly, but even so UK is cheaper compared to Australia, single items shipping costs are way out of bounce.
Can only see more happy shareholders and more unhappy businesses, if it is strategic improve it, dont sell it.

Francois,

The government has no role to play, as a market participant in package delivery.

- It will crowd out other private market participants.
- It is taking risk with taxpayer money.
- It has competitive advantages that other companies do not (such as not needing to make any money, because it is backstopped by the tax payer, and cost of capital advantages to name two)..

There may be a discussion to be had relating to letter delivery, or public monopoly generally, in circumstances where an essential service is not provided by the market... but that's a different discussion.

Don't care what the solution PPP private or public I want to be able to have a business and send an item overseas for less than the cost of the item,
do you think it is possible to send a 500g to 700g pack of business cards or one rolled poster or a small 42x60 painting from here to China or Holland like they can send one to me for $8 to $10 Maxi.

Keyser,
I get your point, yes, the essential service "could" be delivered by the market, but downunder,
currently privately own parcel delivery has not delivered the goods for export that the market "should" deliver because it has this possibility but the margin are smaller than other places on the planet for them, that is, if dutch companies or companies from China can do it(therefore the service could be delivered as you said), no private solution is working from them because they are not interested to do it here at the essential minimum cost, sometimes protecting their own interests and industries, what should be done?

Basically as with many other industries in australia there is no real competition when the market is left to itself, we just get the wrong end from corporations having better places to invest than this far continent with no large market next door called Australia, ie they want to be here on their own terms and prices, some other would call that price fixing, other will say it is the price to pay for the distance call.
So it is becoming a case of public intervention with precise deliverables as with my previous posting.

Any privatisation that does nor quarantine the mail delivery service will create a massive headache for future governments that will make the Telstra one look like a walk in the park. Essentially mail delivery is the equivalent to Telstra's universal service delivery commitments and copper technology problems combined in one nicely wrapped up package. Mail delivery is a loss making entity that is only going to get bigger. A private company will want to decrease it through efficiency gains and price increases. Not a good mix for a politically sensitive area that is heavily union dominated.

Jonathan, agree on all points, good post...(pun intended) ;)

In the case of the NBN we have spent a lot of tax payers money to transport info more efficiently and quicker between A and B without having much apps developed ourselves in the fibre to take advantage of it.

In the case of parcels delivery for export we have all the apps all the goods all the industries and SMEs but we are not going to spend a cent of tax payers money to make anything happen so that we can export and compete with the rest of the world on equal terms.

The private solution has not delivered the goods and the current public infrastructures and interests have blocked public solutions, Mr Abbott, Mr Shorten you have been highly educated and understand what is strategic for growth and jobs what is your solution?

Don't care what the solution PPP private or public I want to be able to have a business and send an item overseas for less than the cost of the item,
do you think it is possible to send a 500g to 700g pack of business cards or one rolled poster or a small 42x60 painting from here to China or Holland like they(the small SMEs and independent traders and self employed) can send personally one to me at home or near by for $8 to $10 Maxi.

that's it ... sell it off a profitable Australia Post like the Royal Mail to a private companies, paid for by borrowed worthless US$'s ... just another political sell-off to financial masters, but will cost far more than $1 a voter ... just for a minute, think about a private company (say like Rupert Murdoch) that polices what you read, will also 'lose mail' by those who offer a different slant of things ...

That's is one very confusing comment, but I am here to translate:

Rupert Murdoch will buy Australia Post using worthless $US and secretly sell it to voters!

why do Governments feel it is easier to sell of the assets to raise funds rather than getting their house in order to reduce costs & raise revenue. While some assets might be better in private hands rather than the Governments, eventually there will be no assets left for sale. Then what happens? Credit rating downgrades? Increased financing costs?

Good point James but see my comment above , Francois Humbert, Fri, 2013-05-31 13:11

neither Private or Public solutions have delivered a parcel delivery price enabling to improve single items export transport costs, probably the highest in the world, without a solution when the bulk transport ie ,mining and farm slow down there is little increase in the replacement export force to compensate.
Until the problem is addressed our economy is doomed to be commodity based forever as we can't increase our export revenue by having new players reaching a critical mass size were they can start to look out overseas for distributors.

It's a no brainer, is it corruption? or blindness?

One of the reasons my father family business overseas was able to succeed for a while 50 years ago and have clients around the world was because of, at that time, transports costs representing less than 20% of the items shipped value.

Hey Francois... the problem is one of geography, rather than market failure.

The fact is that we are an island nation, located massive distances from the major 'consumer markets' of the planet being USA and Europe.

Japan is different (in more ways than one), Indonesia is close but relatively less wealthy, and China consumers are on the rise (if the govt. doesn't blow up their economy..)

Whilst you may get some scale/network effects from higher export volumes (generally).. If you are delivering 'point to point', single items, there seems to be little that can be done to reduce the freight cost in both absolute terms, and as a proportion of the cost of the item.

It is, what it is...

With Australia Post the issue is definitely geography. The Royal Mail has access to millions more customers within a fraction of the size of Australia.

My issue is more the mentality of politicians to sell the assets to pay down debts when they have no intention of buying other assets to replace them.

James,

As I say earlier, the government has no place being an asset owner, or participant in free and open markets.

To the extent that an 'essential service' needs to be provided, and the market declines to provide it, then that is another matter.

Even public service delivery is being 'contracted out' by government, because the private sector is more efficient and effective. (think schools, health, police.. heck, even the defence forces are being contracted out by some sovereign govts.)

If good or service delivery is the objective, at the best available cost, then asset ownership by government is not the answer.

Wrong geography is no more a problem, transport in Australia is both a massive Government failure to support market needs and jobs, and a free market failure, the cost is far more prohibitive than it should be, as our population and markets are far more reachable today than they were in the past.
Given our population and GDP our spending on infrastructures is ridiculous given our market needs and our strategic needs, do we want to remain a bulk commodity country, find, but even there would still be need to invest to remain attractive to business, even for mining ports and rail.

If a dutch artist can send something to me in Perth for $8 to $10 and it cost me $38 to send it back there is a problem.
Look around Maerk, Willenden, et al and the Great Dutch Shipping history, or MSC and other China or semi China Ventures and you have an idea of the strategic spendings these are doing, we are isolated as much as China, what are we doing to disentangle us NOTHING, we just have Gonski or NDIS money spent to buy votes!

We could have done it like China building all the linkage and still can do the same if we take the time to build the linkage needed. No job for the boys, no waiting for the market to do it, no excuse to say the market wont do it, if it is real strategic, makes it happen.

It does not have to be all private, yes you can F1 engines or Airbus, or HSTs or ships and shipping companies around the world with some government participation, it is not apocryphal to build road trains ports shipping companies comptoirs and links with tax payers money or even print them.

Constitutionally, it behoves government to provide the infrastructure services for Australia, even if some aspects are not profit generating. But many that were generating healthy government revenue have been flogged off so inept politicians could make good their flawed political promises. These days, we have Greiner, Keating, Costello and their ilk advising governments to do likewise and when most revenue producing assets become non-government owned, the inevitable consequence have to be increased taxation to provide for economic imperatives.