March 14th 2015

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Articles from this issue:

EDITORIAL What Australia Post can learn from NZ's Kiwibank

FOOD SAFETY To halt toxic food imports - raise quarantine standards

SOCIAL POLICY Coalition govt urged to favour daycare at expense of parental care

DIVORCE LAW 'Without restraint': the abuse of domestic violence orders

QUEENSLAND Qld farmers consider legal action over Callide Dam flooding

CANBERRA OBSERVED Tony Abbott secure in his job ... for now

ENVIRONMENT Despite winter freeze, IPCC insists on global warming

INTERNATIONAL AFFAIRS Indonesia and Australia: more than just neighbours

INTERNATIONAL AFFAIRS Eleventh-hour deal averts Greek financial default

UNITED STATES Obama's communist mentor: Frank Marshall Davis

SOCIETY Rabbi Avigdor Miller's ten commandments of marriage

OPINION A voice for the vulnerable, the enslaved and the voiceless


CULTURE The enduring appeal of audio drama

BOOK REVIEW A compulsively readable biography

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What Australia Post can learn from NZ's Kiwibank

by Peter Westmore

News Weekly, March 14, 2015

While Australia Post reported a first-half year profit slide of 56 per cent, New Zealand Post has reported rising profits, due to its wholly-owned subsidiary, Kiwibank. Australia Post expects to make a loss over the full financial year, the first in 30 years.

The reason for Australia Post’s problems is that it is making huge losses on its letters business. It made a loss of $151 million for the first half of the current financial year. Letter volume decline was 8.2 per cent, year-on-year, which is the largest decline recorded since Australia Post’s letter volumes started falling in 2008.

Australia Post’s current forecast for the full year is for a company-wide loss — its first since 1982. Losses in the letters business are forecast to overwhelm the parcel business’s profit in the seasonally quieter second half of the financial year.

Australia Post wants to double the basic price of letter delivery, up to $1.50 for priority mail; but the Commonwealth government has not yet agreed, because of backbench opposition to soaring postal charges.

(It is reported that the Minister for Communications, Malcolm Turnbull, agreed to the increase in postal charges late last year, but Cabinet has yet to agree.)

Coincidentally, New Zealand Post, which faces similar challenges to Australia Post, has just reported a $NZ100 million dollar half-year profit, and expects to make a larger profit over the whole year.

New Zealand Post has responded vigorously to a similar fall in letter deliveries — but not by increasing charges.

Its letter volumes fell 9.8 per cent, or by 36 million items, compared with the same six months a year earlier.

To deal with the problem, New Zealand Post announced 400 redundancies and service cuts, including deliveries every second day in large towns and cities, as part of its plan to adapt to the reduction in letter deliveries.

It is also reportedly looking to use contractors to deliver mail instead of employees. A trial on contract deliveries is to begin shortly.

Unlike Australia, where Australia Post is seeking a massive increase in the cost of delivering mail, there has been no talk of lifting postal rates, although standard postage there is slightly more expensive than in Australia.

The reason is obvious. Increasing postal charges will simply push more people to use electronic mail, which is virtually free.

The main reason why New Zealand Post is still profitable is that it runs the nation’s only publicly-owned bank, Kiwibank, established in 2001.

Post offices in New Zealand are also branch offices of Kiwibank, bringing large numbers of people into these establishments.

Kiwibank was established after earlier governments had privatised the government-run PostBank, the Post Office Savings Bank of New Zealand, as part of the deregulation of the financial system.

As a consequence, all the main New Zealand banks fell into the hands of the “big four” Australian banks in the 1990s, prompting widespread concerns about the loss of economic sovereignty.

This prompted the Labour-led coalition government that was in power during 1999-2002 to establish Kiwibank.

It appointed a former leader of the opposition National Party to head the bank, ensuring it had a level of bipartisan support.

From modest beginnings, Kiwibank has continued to grow.

Kiwibank’s profit in the last financial year was $NZ100 million, on revenue of $1.4 billion. Its assets exceed $17 billion, and its deposit base is over $14 billion.

With over 300 branches across the country, Kiwibank’s core business consists of personal banking, business banking, KiwiSaver (a retirement savings scheme which covers over 60 per cent of the working-age population), New Zealand Home Loans, and other financial services.

Kiwibank’s success has also provided strong competition to the foreign-owned banks. It has a higher level of customer satisfaction than most foreign-owned banks, and has won numerous awards for its banking services.

The bank’s continued expansion comes despite the serious impact of both the 2007/08 global financial crisis and the 2011 Christchurch earthquake.

Kiwibank chief executive Paul Brock said that this result was very encouraging and pointed to a record full-year performance.

Kiwibank has featured cheeky promotions which poke fun at the large Australian-owned banks, and appeal unashamedly to New Zealanders’ sense of national identity.

It has around 880,000 bank customers, which is about one in four of all the nation’s bank accounts.

In contrast with New Zealand Post, Australia Post’s mail service lost $328.4 million at an earnings-before-interest-and tax level last year, with the losses increasing through the year and pushing the group into an overall $43 million second-half loss.

If Australia Post wants to return to solvency, it should urgently look across the Tasman to see how to remain relevant, and provide a service like New Zealand’s Kiwibank.

Peter Westmore is national president of the National Civic Council.

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