Australia Post Delivers Less, or You Can Pay More

Yesterday you found out how the world hasn’t changed. Today we’ll play devil’s advocate, consider the economist’s other hand and peer into the other half of the glass.

You’ve paid your taxes. But in the near future the postman might not turn up for days. It’s all to do with the $218 million loss Australia Post pulled off last year.

Edging dangerously towards capitalism, Australia Post Chairman John Stanhope said there were two possible solutions. AP even asked their customers which one they wanted: Would they prefer their post delivered three times a week, or pay an annual $30 fee for daily delivery? We’re not sure what the point of the survey was because both are set to be offered anyway. And we couldn’t find the result of the survey.

As Stanhope put it, ‘If you want it fast, you pay for it.’Our warm congratulations to Mr Stanhope for discovering express mail.

Let’s ignore the fact that a postman goes past just about every door anyway. So if a small number of people take up the $30 offer, won’t it just be an inconvenience for the post office to figure out who gets the delayed mail and who gets the daily? And then the postman will be going past doors he could easily just deliver to. It’s a classic example of government trying to imitate capitalism.

Of course, the debate isn’t about the post office and its losses. Australia Post is far from the only struggling public service business. The debate is about who pays for semi and fully public services. And it’s budget time, so the war of words is well underway.

We’ll leave the details over what gets cut to Mr Hockey. It will probably be reinstated by the next government anyway. What’s more interesting is how detached from reality the debate can get. So let’s clear up some basic concepts.

Capitalism isn’t really a belief set or ideology. It’s just a reality. It holds true in North Korea just as much as Australia. Sometimes free markets are called ‘black’ or ‘household sector’ because the government tries to stop them. Either way, people rely on them. The government itself does too. Even government services need to be paid for. And in the end, the productive people do the paying.

Without productive people, all the money in the world couldn’t buy stuff, because there wouldn’t be much.

When the post office says users will have to pay more, what it also means is that the taxpayer will have to pay less. For you and me, that probably means hardly any change. We pay taxes and get the mail.

But for the people not paying taxes, it means reality has struck. Suddenly their welfare has to stretch that little bit further. The balance between receipts and outgoings from the government changes. People realise it costs money to receive mail. The post goes from being a form of welfare to an expense.

Until now, the government paid for things for people by borrowing. But Europe’s sovereign debt mess has demonstrated this doesn’t solve the problem of having to pay. Borrowing only buys time. The interest rate is the price you pay for buying time. Central banks have lowered this price to reduce the cost. But even that just buys more time. Eventually both the interest and the debt come due.

All those people who say Australia doesn’t have a debt crisis because our debt is low compared to other countries are of course ignoring what is happening in those countries. In short, the mail wasn’t delivered.

Do enthusiasts for government debt give the same advice to their children? ‘Borrow money because everyone else has,’ sounds suspiciously different to the old ‘don’t jump off a cliff just because everyone else is doing it’ story that parents use to no avail.

People who want more debt should go and borrow money themselves instead of dragging their fellow taxpayers into communal debt. Most taxpayers just don’t want to be the guarantor on the national mortgage while the postmen cost the nation $218 million.

Regards,

Nick Hubble+
for The Markets and Money Australia

Join Markets and Money on Google+


Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like.


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