Thousands of Posties across Australia face an anxious wait to find out if they will keep their jobs after Cabinet approved a radical overhaul of prices and delivery frequency in an attempt to stave off predicted losses of up to $1 billion a year at Australia Post.

Communications Minister Malcolm Turnbull, Finance Minister Senator Mathias Cormann and Post on Tuesday announced that the key changes that the mail service’s management has been lobbying for more than a year to put into place now had the formal backing of the government, clearing the way for key regulatory changes.

Australia Post and its boss Ahmed Fahour are betting heavily that the combination of a steep hike in stamp prices, from 70 cents to $1.00 coupled the introduction of a slower standard mail service that adds two days to delivery times standard will be enough to staunch the torrent of red ink from its letters business.

It will also make Post ultimately more saleable in the medium term should this or a future government look to a sell-off or a float of the business.

The official line on the reset is that the big price hike and slower standard services will allow the letters business to break even and put it on a sustainable long term footing. Or at least as long as people keep sending letters.

“Australia Post is facing significant structural decline as people choose to communicate over the Internet. Australians are now sending one billion fewer letters a year than they were in 2008, with letters losses rising to more than $300 million a year,” the joint ministerial statement said.

“These measures will also help Australia Post maintain its extensive post office network, particularly Licensed Post Offices (LPOs) in regional and remote communities.”

That may be true, but the elephant in the room remains job shedding and how many posties and other staff will be handed letters of redundancy to nail down costs.

Post remains one of the public sector’s true mega-employers where big savings on labour costs, a major cost input, stand to be made over time.

“There are 32,500 employees in Australia Post. Obviously there are implications for jobs in these changes,” Mr Turnbull told the Parliament during Question Time on Tuesday afternoon.

“However, I note that the company has a post people first program; and over the last few years, as jobs have gone from the letters business, 61 per cent of those people have been successfully redeployed elsewhere in the company,” the Communications Minister said.

He said Australia Post had “a three ‘R’s policy—retrained, redeploy and then redundancy as a last resort” adding that the mail monopoly “is working very, very closely with the union, whom I met only yesterday with the shadow minister, and is very focused on looking after its employees.”

The big question now is how much cost efficiency Mr Fahour can squeeze out of the price hike and service slowdown minimize the need for electorally damaging retrenchments in favour of job shedding through natural attrition.

Unions, especially the Communications Workers Union and the Community and Public Sector Union have a vested interest in making the big reset work, not least because Post remains highly unionised and labour shedding jobs translates to fewer members and fewer dues.

Mr Turnbull said Australia Post had assured him that the changes would also “put about $75 million of extra revenue” Licenced Post Offices (LPOs), which are essentially franchised and privately run concessions that now number 2900.

He said the changes equated to about $20,000 a year extra for LPOs that had been “doing it tough during this period.”

Some of the efficiency savings Post is likely to be able to generate by slowing down its service are in optimising its logistics, especially the mix of line-haul (trucks) to air freight between capital cities and the region.

A clear advantage of a wider delivery window is that the extra time will allow Post to utilise more trucks and divert mail from more expensive planes.

At the same time bigger trucks running less frequently with fuller loads also have the potential to cut costs.

“There will be a regular service, which will be the regulated service, which will arrive generally two days later than it currently does. This will result in a very significant reduction in costs over time,” Mr Turnbull said.

Unions are expected to meet on Wednesday to assess the changes, which do not require legislative change but fall into the category of a ‘disallowable instrument’ that can be knocked out by the Senate.

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