Rural Post cut could pass muster

DECLINE: NZ Post head Sir  Michael Cullen wants the SOE’s duties reviewed.
DECLINE: NZ Post head Sir Michael Cullen wants the SOE’s duties reviewed.

Farmers could probably live with a rural postal delivery three or four days a week, says Federated Farmers president Bruce Wills.

Those wanting to keep a six-day service may have to pay for the extra days, he said.

State-owned enterprise NZ Post is in discussions with the federation and Rural Women NZ as the company awaits the Government's response to its request for a review of the 1998 Deed of Understanding which stipulates NZ Post must maintain six-day-a-week delivery to most of the 1.9 million delivery points in New Zealand and operate a network of no less than 880 outlets.

The company has 220,000 registered rural customers, served by 540 Rural Post contractors with 579 delivery contracts.

It operates 600 Rural Post delivery vehicles, which include vans, utes, cars, trucks and "the odd bus and boat". Daily they travel 96,000 kilometres on 18,000 roads.

In a toughly worded letter to State-owned Enterprises Minister Tony Ryall earlier this year, NZ Post chairman Sir Michael Cullen said 2012 was crunch time for the capital-strapped SOE, and cost cutting and new products could no longer counter rapidly and irreversibly falling mail volumes.

His request for a review is being worked on by officials at the Business Innovation and Employment Ministry.

There is no word on when a recommendation might emerge from the ministry, but process would require it to first go to the minister, then before a Cabinet committee and then out for public submissions.

A NZ Post spokesman said the SOE was keen to engage with the rural sector on its quest for "flexibility around delivery". The rural postal network had its own challenges and requirements, which was why it had its own business, he said.

"But we recognise you can't homogenise the rural sector, which has many different strands and shades. We would anticipate that Federated Farmers and others will make submissions."

Wills said the federation agreed with and understood NZ Post's need to have the deed changed.

"It doesn't make economic sense to continue six-day delivery. More and more stuff is being sent by email, including by farmers.

"I would suggest that three or four-day delivery at some stage, maybe in two years, is just common sense."

Some farmers may have an issue because they want their newspaper delivered daily, Wills said.

"Those who want six-day delivery may have to pay something extra."

NZ Post said in the past 10 years mail volumes had fallen 20 per cent while delivery points had increased by the same – "an irreversible and unsustainable trend".

Digital substitution has seen mail items fall from 1.1 billion a year a decade ago, to 829 million a year today. In six years just over 600 million items are expected to be mailed, a 40 per cent drop on 2002.

When the deed was signed in 1998, fast-post mail had a volume of 46 million a year. Today that volume is 8 million, expected to drop to 5 million by 2018.

This means fast-post volumes will have fallen 90 per cent over 20 years.

A decline in total mail volume for 2011-2012 of 6.4 per cent was the fastest fall rate ever, NZ Post said.

On the brighter side, parcel growth is seen as a growth opportunity for NZ Post, but while it is forecast to increase by 33 per cent or by seven million parcels in the next five years, the company's total mail volumes are forecast to fall by 215 million items.

The parcel volume rise would not be enough to replace this revenue loss, it said.

Parcels make up just 2.6 per cent of NZ Post's total mail volumes.

"If NZ Post did nothing to change its processing and delivery systems, the postal system would begin to lose money by 2016," a spokesman said.

"By 2017 those losses would balloon to $25 million, then $44m the following year and up to $75m by 2020-2021."

About 15 per cent of NZ Post's customers send 90 per cent of the mail it handles, he said.

These are mainly banks, telecommunications and utilities companies, councils and government departments.

NZ Post hoped to launch its own digital answer to the online mail revolution this year.

Waikato Times