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Australia Post’s Horizon System Faces System Failures

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Australia Post has rolled out a new point-of-sale system in post offices called Horizon. I have received many complaints from Australia Post licensees about system failures, including outages and missing funds. Payments that previously went directly into the licensees’ accounts are now being deposited into Australia Post’s account, forcing licensees to wait several days to access their money.  

I questioned Group Chief Executive Paul Graham about the rollout. His responses were entirely at odds with the information I have received from numerous post office licensees. While Mr. Graham claimed there had only been one outage, I was informed of multiple outages, including one that occurred during the Estimates session when Mr Graham was present.  

Both the licensees and Mr Graham have offered to hold meetings and conduct inspections to clarify the situation. I look forward to uncovering where the truth lies.

Transcript | Part 1

Senator ROBERTS: Thank you, Mr Graham, and your colleagues for being here. I am advised by multiple Australia Post licensees that the new Australia Post point-of-sale system, Post+, is in most aspects of its operation not fit for purpose, yet licensees are required to operate using this system. My questions test that contention, which I’m sure you will disagree with. On Monday, 27 May, the system went down for several hours. Australia Post offices were unable to process transactions. According to the licensed post office network, this cost their outlets $200,000 in lost transactions and wasted staff time over several days due to the errors generated in the breakdown. Who pays that loss—you or the licensee?

Mr Graham: Australia Post pays that loss. We repaid that. This is a brand new point-of-sale system that has been rolled out to almost 4,000 post offices. It is a state-of-the-art system replacing what was a 30-year-old system that was well beyond its use-by date. It is fair to say that when you implement any brand new system to the scale that we have implemented it, there will be teething problems. However, I challenge and ascertain that the vast majority of post office licensees are very pleased with the system. I have been around our post offices a lot, particularly in recent months. It does what it says on the box. It has delivered and will continue to deliver even greater efficiency than the old system. That one outage was an unfortunate event. We were still able to transact, but not obviously online. Any cost to the licensee for that was fully compensated by Australia Post.

Senator ROBERTS: Thank you. In the outage, some transactions that were in the process of completing when the system went down failed to complete. In some cases, money went missing. Your helpdesk instructed post office licensees to put in the amounts that went missing from their own pocket to ensure your system balanced with the promise that you would investigate and pay them back if it were sorted out. How much money went missing in the outage? How much money was put in by licensees?

Mr Graham: Well, those statements are not correct, Senator. We did not ask the post offices to put the money back in to balance it out. We provided a report for all those transactions that were not processed through. We did a reconciliation and audit trail working with the individual licensees. We balanced the books with them and had them put through those transactions when the system was up and running.

Senator ROBERTS: Judging by your reaction—we’ve heard this from licensees—you don’t think it’s fair for licensees to put their own money in to make your system balance when the fault was not with the licensees but with the system. So you would disagree that it is happening?

Mr Graham: Well, they didn’t put their money in. They weren’t asked to put in their money.

Senator ROBERTS: So you would disagree?

Mr Graham: Yes. We strongly disagree, yes.

Senator ROBERTS: What is the longest outage Post+ has experienced? I have received reports that Post+ can go down for days and that, while it is down, the post office can’t trade.

Mr Graham: No. That is completely false, Senator. I think we are talking minutes. We had that one outage, as you said, for a couple of hours in the very early days when it was launched. We are talking in minutes. I can’t
remember when we last had a P1 on that system. As I say, it is built with state-of-the-art architecture. It sits in the cloud. It is fully backed up every day. The reconciliation process that happens at the end of the day, which used to be a very manual process for the licensees, is now fully automated. We’ve launched a new suite of reports that show them every transaction. It enables them to get detailed analysis of the trading during the day. This is a modern system. Those statements are totally incorrect. I strongly object to those statements. I would also say that it is a very small minority of licensees who have made the noise around this system and have done so, in my view, not because of the fact that the system is not performing—it is—but for other mischief.

Senator ROBERTS: Okay. Let’s continue. Licensees report that the system does not provide an adequate reporting function, with the outcome that the licensees don’t have the data they need to run their daily business.

Mr Graham: Again, Senator, as I said, we have had a reporting system from day 1. We have recently launched the latest update of that. That report, and indeed the review of the system, is done in conjunction with licensees. We have a licensee steering committee that meets on a regular basis to look at enhancements and improvements to the system. We have a whole team of people who are working on these systems and improvements on a day-to-day basis. This is a very collaborative effort. I argue that if you were to go around and speak to licensees, you would get a very positive reaction to the system.

Senator ROBERTS: Maybe that is what I should do. Licensees are reporting Post+ runs slower than the system it replaced, meaning licensees are having to put on extra staff at their own expense. How is that an improvement? LPOs are small businesses. They can’t afford to bankroll your system development. That is the way they see it.

Mr Graham: Well, again, I would say that is a very small minority of licensees. Obviously when you are replacing a system that is 30 years old that people basically know how to operate in their sleep and you introduce a brand new system, it is like going from a rotary phone to a smartphone; it takes time for people to get used to the new navigation of that system. That is something that we highlighted to every post office before the implementation. The actual system itself, in terms of processing transactions, providing more meaningful insights and data, is significantly superior to the 30-year-old COBOL coded system that was in place.

Senator ROBERTS: You have a helpdesk which logs every disputed transaction from a post office. It must be a simple matter to get out data on those reports?

Mr Graham: It is, Senator. We have released, as I say, an updated and enhanced data report a couple of weeks ago that gives insights, visibility and transparency to every transaction that takes place in that system.

Senator ROBERTS: On notice, could you please provide the number of transactions that have needed to be sorted by the helpdesk, the total value of those transactions, how many are currently in the process of being resolved and, finally, how many were resolved in a manner that required the post office to make good the transaction?

Mr Graham: I’m happy to do so, Senator. I know from looking into that issue that it is a very small amount. We will provide that detail.

Senator ROBERTS: Thank you. The next issue is a missing transaction. Licensees have suspected that money is going missing in the normal operation of the system. Some have started running transaction reports hourly. This is catching your system out by showing the licensee putting the money in for the customer and the money then just disappearing into the ether—gone. At this point, your help desk tells them to put the money in again out of their own pocket. Licensees are reporting thousands of dollars have to be made up per outlet. Are you aware of the problem of missing money?

Mr Graham: That is totally incorrect, Senator. I dispute those claims strongly. The system provides clear transparency on everything that is transacted. There is a complete electronic audit trail, which didn’t occur in the old system. We know every transaction that is reported. What we do find from time to time is that there are operator errors. For example, someone processes a cheque but they put it in as cash. We have to go into the system and talk to the licensee and reverse that transaction so that we can actually record the right dollars going into the right account. This is a modern, state-of-the-art point-of-sale system. As I say, it is replacing a 30-year-old system that was not cybersafe and that had lots of challenges and issues. I would say very strongly that the value that the system will create and is creating will be of significant benefit to the licensees going forward.

Senator ROBERTS: Previously, sales of merchandise through the Australia Post Shop went into the licensee’s bank account on the day of the sale. Under Post+, the money goes into your bank account and is sent back to licensees in 48 hours. It is longer on weekends. How is adding that extra step and introducing payment delays to LPOs an improvement?

Mr Graham: Senator, I’m not aware of that issue, but I’m happy to take it on board. I wouldn’t see any reason why we would want to delay payment. We understand the importance of cash flow to the licensees. We have done a number of things to improve cash flow to the licensees. In terms of merchandise they buy, we give them credit for that merchandise straightaway even when it has not been delivered by us. We don’t take the money out until they physically do it. I am happy to take that query on notice. It doesn’t sound correct to me.

Senator ROBERTS: If you could, please.

Mr Graham: Yes, certainly.

Senator ROBERTS: This is a question of whether or not you’re abusing power over licensees by requiring the LPOs to cover the losses of a system you are requiring LPOs to adopt. What incentive is there for Australia Post to get this right if you don’t wear the losses from this going wrong?

Mr Graham: Well, first of all, Senator, again, I would restate that we do not expect the licensee to suffer any loss for what may or may not be a system failure. That is not an expectation of Australia Post. If the system is down and we have caused any financial harm to the licensee, we will refund whatever harm that is. We are very clear—indeed, it would be a breach of the franchise code if we were to do that—so that does not occur. If the licensees can show us that they have suffered a financial situation because of the system or an error in the system, we will happily make good on that loss.

Senator ROBERTS: I’m sure they’re watching.

Mr Graham: I’m sure they are. I am happy to talk to them.

Senator ROBERTS: What is the budget for Post+ implementation?

Mr Graham: The total budget for Post+ was about $270 million.

Senator ROBERTS: That is $270 million?

Mr Graham: Yes. It is a very large investment we made. Australia Post made that investment to improve the efficiency, improve the security and improve the features and benefits that were available to our customers as well. It has many benefits to our customers in terms of electronic receipts and SMSs et cetera. It does a number of other things that benefit the end customer.

Senator ROBERTS: Where did the money for Post+ come from?

Mr Graham: It came out of our normal capital investment cycle.

Senator ROBERTS: Is there software code commonality between the UK system known as Horizon and Post+?

Mr Graham: Absolutely not, Senator. The Horizon system was built 16 years ago. This is a brand-new state-of-the-system built in the cloud and built with global best practice around point-of-sale systems.

CHAIR: I will need to rotate the call, Senator Roberts. Make this your last question.

Senator ROBERTS: I need to come back afterwards.

CHAIR: Sure.

Senator ROBERTS: Is it your testimony, then, just to make sure I’m clear, that if a review of the software was done, there would be no code commonality between your system and Horizon?
Mr Graham: I am not a technical expert, Senator. Given the Horizon system was built in a completely different software language 14 or 15 years ago, I would be very surprised if there were any coding similar to that and done by a completely different company.

Senator ROBERTS: Thank you.

Transcript | Part 2

Senator ROBERTS: I have a brief few questions. Do you, Mr Graham, or Australia Post have access to the software code for Post+ to review? Did Australia Post review the code before implementation?

Mr Graham: Yes. We have a comprehensive review process. We have also had that process externally validated. We have ownership of the source code of that software platform. It is a core, obviously, operating platform for our retail business. Therefore, it is really critical that it does what it says it does on the box and that we maintain and continue to invest in updating that software to reflect improvements we can make both in its operating system in relation to the enhancements that can be provided to customers when they transact with us over the counter and being able to make it more efficient for our team members and the licensed post offices that use it. I will give you an example. One of its features is an online training program. If you are in a transaction and you are stuck, you can go to the screen. It will show you and explain how that transaction could be managed. None of that was available in the old system. The old system was literally a rotary telephone equivalent to what is now a smartphone.

Senator ROBERTS: So you manage it yourself internally—your Australia Post people?

Mr Graham: No. We work with the software provider who worked with us to build the software. They work with us. We have our own team of software engineers. They have their team. We work with them to implement the enhancements, do the normal backups and all the other things you would do with a large-scale technology system.

Senator ROBERTS: So the company installing the point-of-sale system is Fujitsu. Is that correct?

Mr Graham: No. That’s not correct, Senator. They are installing the hardware—the screens and the keyboards. The company that is involved is a company called OVC, which is an American company.

Senator ROBERTS: What is the name of the company?

Mr Graham: It is OVC. They specialise in point-of-sale systems. They built the software in conjunction with Australia Post. The role that Fujitsu plays is a role that they’ve played with us through a contract. They have responsibility for servicing our screens, laptops, keyboards and all the normal—

Senator ROBERTS: Hardware only?

Mr Graham: Hardware only—correct.

Senator ROBERTS: Fujitsu is the company that provided the UK Horizon system. Correct?

Mr Graham: Fourteen or 15 years ago, that’s correct, Senator. Correct. They’ve had no role in the software provision of Post+.

Senator ROBERTS: They cannot go in and change the data in a system such as account balances, as they testified they could in the UK?

Mr Graham: Correct. It is a closed system. They have no access to the software. They have no role in the software. It’s completely closed. The only people who have access to that are our engineers. Again, we have a clear technology audit trail for when people access the system as well as OVC.

Senator ROBERTS: Thank you. This is the last question in this thread. I have a few more after that on another topic.

CHAIR: You are the only one left, Senator Roberts. You can keep going.

Senator ROBERTS: Money is going missing, according to the LPOs. Where is that money going? It has to be going into someone’s bank account.

Mr Graham: Senator, first of all, again, I would strongly challenge that claim. Money is not going missing. We have a full electronic audit trail of every single transaction that takes place. We provide that report both to the licensees and to our own internal team. Again, I would highlight that there is a very small noisy contingent of one licensee group that is not representative of the vast majority of licensees. I have been out there. I have met with them. I have been in town halls. I have been around the country, as has our retail team. The vast majority of people—again, I am happy to accompany you to visit our licensees—are very positive about the system, having replaced an old creaky system that was 30 years out of date.

Senator ROBERTS: So is this small disgruntled group scattered across the country, or are they in a locality?

Mr Graham: I couldn’t give you that. I know it is a very small group. As I said earlier, we believe they are pushing a broader agenda, not just around Post+. Therefore, they are creating noise when we believe there is no noise. We take very seriously to ensure that the system does what it says it does. We have spent $270 million. It had better do what it does. This is going to be around for a long time. We have made sure that we will do an upgrade of this system every year. That is unlike the old system, which was well out of date and had not been upgraded and was a cyber risk. This system, again, is built in the cloud with modern architecture and modern infrastructure. We are committing tens of millions of dollars to continually make sure it is upgraded and reflects the needs of both the users, which includes the corporate post offices as well as the licensees, and our customers.

Senator ROBERTS: So you don’t know how big this small group is that you’re talking about?

Mr Graham: No. We believe it is a small minority based on surveys we’ve done in relation to Post+, activity when we have been out talking to licensee associations and, indeed, the day-to-day backwards and forwards we have with all licensees.

Senator ROBERTS: So they are not in any one of the two licensee groups?

Mr Graham: They may be, Senator, in one group.

Senator ROBERTS: What are their main issues? What are they disgruntled about?

Mr Graham: Well, I think it has been a longstanding issue with Australia Post over a long time. As I have said, I cannot fix the problems of the past. They are in the past. My job is to fix today and tomorrow and to listen and to respond to any genuine concerns they have. We have done that. We are not perfect. Occasionally we do make mistakes. We open up and put our hand up about those mistakes. They have, I guess, motives around the role that Australia Post should play in banking, for example. We believe that our Bank@Post service is the right service for us. We don’t believe we should go beyond that. As I say, there are historic gripes that go back some time. We have worked very hard to ensure that we resolve any outstanding issues. I say again, and with strong conviction, that the vast majority of our licensees have a very positive attitude to Post+ and have a very positive attitude to the investments we are making. Both associations stood behind our licensee buyback program in metropolitan areas. They clearly recognised the significant overlap and the financial strain that a lot of these licensees in metropolitan areas were undergoing.

Senator ROBERTS: I will move to the next topic. Can I pay my Telstra mobile telephone bill at Australia Post?

Mr Graham: You can. You will pay a fee for that, which Telstra has imposed on you as a Telstra customer.

Senator ROBERTS: Who gets the fee?

Mr Graham: The fee gets split, I believe. I will take it on notice. I believe it gets split between the licensee, who gets money for the transaction, and Telstra.

Senator ROBERTS: Recently, Telstra updated their terms of service for some mobile phone customers. It no longer allows payments to be made at post offices. Have you just lost a customer?

Mr Graham: Well, this is not uncommon, Senator. As I said, our over-the-counter transactions outside Bank@Post have gone down 28 per cent over recent years. More and more companies are encouraging their customers to pay bills digitally or electronically or online. We have seen a significant decline in what we call our Billpay services for paying gas bills and telephone bills et cetera because customers are being encouraged to pay electronically or, indeed, are being penalised if they pay over the counter.

Senator ROBERTS: The banks like doing that to us anyway.

Mr Graham: Well, that’s an opinion one could express, Senator, yes.

Senator ROBERTS: I’m not asking for your opinion. Has a long-term solution been found for the cost of carrying cash, such as with Armaguard?

Mr Graham: It’s a very good question, Senator. I don’t believe a long-term solution has been found. Again, this is where Australia Post plays an important role. Whilst we’ve had the banks and, indeed, the RBA, confirm that cash use in the economy is declining, we cater to a demographic and a profile of society where cash is the main form of transacting. It is the elderly. It is people who don’t have English as a first language. It is areas where there is a high immigrant intake or a distrust of financial institutions. We are on the other side. We are seeing growth in that area of transactions. My observation is that these are customers who may not be that attractive to the bank because they don’t have mortgages or they don’t have business banking accounting. We are the service provider that is providing that service and will continue to provide that service. As I said in my opening statement, whilst we remain very happy to do that, we need to do that at a small margin so we can continue to invest in that service. That service is on track to make a loss for Australia Post.

Senator ROBERTS: Didn’t you say maybe 12 months ago when I saw you that Australia Post has the largest retail network in the country?

Mr Graham: We have, in terms of our footprint, over 4,181 branches, correct.

Senator ROBERTS: I will come back to that in a minute. Do you have plans to change any post offices from manned to unmanned using kiosks?

Mr Graham: We have a whole range of different formats, including unmanned kiosks for self-service terminals. They are both our parcel lockers as well as where you can go to buy a stamp, envelope or satchel. That’s part of the broad range of services we provide. As I said, when we look at a suburb or a neighbourhood, we look at what services they are demanding. For example, a group in a Sydney area recently was looking for postal services. We had a town hall. We met with the community. It’s a community where a lot of parents both work. They wanted the convenience of picking up their parcels out of hours, so we installed three locker banks. That more than satisfied that local community along with some self-service terminals. In other cases—

Senator ROBERTS: Excuse me. That is to enhance a manned post office rather than to replace a manned post office?

Mr Graham: It’s to enhance availability and convenience. In other places, such as growth corridors that we see in Western Melbourne or, indeed, Newcastle and west of Newcastle, we will work with community to put in a new post office or a new range of services. We continue to see customers demand convenience with their parcels. They want to be able to pick them up 24/7 and access them through the postal pap. It’s not a simple one-size-fits-all. We look to try to adapt a range of offerings to meet community needs.

Senator ROBERTS: Thank you. This is my last question and the last topic. Some months ago, you were very positive about the possibility of an Australian postal bank. What are your thoughts now on the possibilities of that? Are you getting any support from the government?

Mr Graham: Senator, I’ve always made it clear that is a matter for government. We are very happy to continue providing our Bank@Post over-the-counter transactional services. We would be even happier if we make a small margin and our licensees could get more money for that. Anything beyond that is a matter for government.

Senator ROBERTS: Thank you.

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Government-Owned Bank Back on Labor’s Agenda

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On August 29th, The Australian newspaper reported that a government-owned bank, created out of Australia Post, may be back on the Labor government’s agenda. This move is seen as a response to the recent closures of numerous bank branches in regional Australia. If this report is accurate, I applaud the Government for this welcome development. 

Years of regulation have not succeeded in forcing the banks to act with honesty, decency, and compassion.  Additional regulation is not the answer, as large banks typically have access to superior legal resources compared to the Government.  The answer lies in establishing a People’s Bank that can provide competition to the Big Four banks oligopoly, or more accurately, the cartel. 

A People’s Bank could rewrite their Banking Code of Practice, restoring protections that successive Liberal Governments have removed—such as face-to-face banking, cash transactions and a guarantee of banking services to prevent the problem of political de-banking. People’s Banks worldwide have proven their ability to be secure and profitable, and to hold commercial banks accountable, as outlined in my speech. 

Transcript

The Australian newspaper reported on 29 August that ‘a government owned bank created out of Australia Post is understood to be back on the Labor government’s agenda’ and that it is ‘seen as a response to the closure of numerous bank branches in regional Australia’. I hope this report is well founded, and, if it is, I applaud the government for this welcome development. 

Years of regulation have failed to force the banks to behave with honesty, decency and compassion. More regulation is not the answer. Big banks will always have better lawyers than the government. The answer is a people’s bank offering competition to the big four bank oligopoly—or, more accurately, cartel. As someone who participated in the inquiry into bank closures in regional Australia, I attest that there is a desperate need for a public bank to revolutionise Australia’s banking system, the way the original Commonwealth Bank did, which the Fisher Labor government established in 1912. 

Today the big four cartel controls 80 per cent of the market and dominates banking. They’re acting together to remove face-to-face banking, which doesn’t stop customers from needing face-to-face services. It just forces customers to travel further. It’s not just in the regions; it’s as difficult for the elderly in the city to travel to the next suburb for their banking as it is for a regional customer to travel to the next town. 

We saw numerous instances of the banks’ dishonesty when closing branches, and we’re seeing it again right now with ANZ’s closure of its Katoomba branch. The ANZ treated Katoomba as a regional branch until it promised to not close the regional branches as a condition of its merger with Suncorp Bank. Lo and behold, suddenly ANZ claims Katoomba is not a regional branch so is proceeding to close it. The big four have concentrated close to 70 per cent of their lending into residential and investor mortgages, with more money fuelling the increase in house prices, while neglecting small business lending and regional communities. 

All four are aggressively pushing customers away from cash and into digital banking and transacting so they can surveil and harvest your data and collect fees on all non-cash transactions. They now gouge Australians out of more than $4 billion per year in transaction fees and surcharges. In short, the big four serve only themselves and use their oligopoly power over a captive market to exploit their customers. 

There’s a dire need for a public bank that can set standards of service and break up the banking cartel. A post office bank is the perfect way to do it, operating under a modified banking code of practice to restore protections to customers that successive Liberal-National governments have removed and guaranteeing cash and banking services, face-to-face banking in a branch, best interests of the customer and protections against politicisation of banking. 

The Commonwealth Bank originally started in post offices in 1912, from which it provided banking services to all parts of Australia, even remote areas. It raised loans for the government at one-tenth the cost of the private banks. In the panic of 1914, it protected deposits in all the banks. It supported Australia’s agricultural production in World War I and funded the emergency purchase of a fleet of ships in the war, which became Australia’s first national shipping line. It made development loans to local councils all across Australia for crucial infrastructure, and it made affordable housing loans to returned soldiers. It accomplished all of this in its first decade, before its political enemies reduced its ability to compete with the private banks, until later when another Labor government unleashed it again in World War II. 

Public and post banks are very successful around the world. The Japan Post Bank is one of the world’s biggest banks and was the secret to Japan’s postwar economic miracle, funding their government’s investments in infrastructure and industries. France’s post bank, La Banque Postale, started in 2006 and is already Europe’s 18th biggest bank and the biggest lender to local councils in France. Kiwibank started as a post bank in 2002, quickly growing into New Zealand’s fifth largest bank and the only bank that can compete with New Zealand’s big four banks, which Australia’s big four banks own. Its first achievement was injecting competition which stopped all branch closures in New Zealand for seven years. In the global financial crisis, Kiwibank was the only bank to increase lending while the private banks all reduced lending. Listen to this: the Bank of North Dakota, not a postal bank but a brilliant state owned bank, supported North Dakota’s public finances and its farmers for more than a century, making a profit in every year of operation. In the 2008 financial crisis, North Dakota was the only United States state to stay out of crisis. 

I applaud the news that the government is in talks with Australia Post on this solution, and I urge the government to have the vision to create a powerful bank that can once again serve the people of Australia. 

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Australia Post Flies in the Face of a Cashless Agenda

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Australia Post’s Bank@Post is expected to fill the hole left by banks closing branches in many rural and regional towns around Australia. I asked Group CEO and Managing Director, Paul Graham, for his views about how that’s going so far. His forthright response confirmed what bank closures mean in the communities where Australia Post is left to try and pick up the pieces. It is not the automatic solution the banks have suggested during the bank closures inquiry, which I knew from constituent feedback through my office.

Customers, explained Paul Graham, are looking for a broader scope of services than they are equipped to deliver. Small businesses particularly feel that they’re not able to access what they used to through their banking branches. Provision of cash has become an issue. Whilst there are those who say cash is going to die, Mr Graham certainly doesn’t see that in many demographics and areas of Australia.

With support from banks, Australia Post could extend the range of banking services. Whether for small businesses, the provision of cash, or even managing large numbers of gold coins following fundraisers, Australia Post rightly sees its over-the-counter Bank@Post services as essential.

More regional and remote towns are being left without a bank. Coober Pedy is a good example of a cash town given the nature of its work. Australia Post is now flying cash into that town on a weekly basis because the banks have all left.

There is obviously a vacuum left by the bank closures and post offices are well positioned to fill it with the right support.

Transcript

Senator ROBERTS: Thank you for appearing tonight. My questions are fairly short. At the Senate inquiry into regional bank branch closures, I asked Westpac CEO Mr King, ‘How much do you pay Australia Post for a community representation fee?’ The response on notice was: Westpac is happy to provide a specific figure, including the Community Representation Fee, however our contract with Australia Post requires both parties to agree to the release of any commercial details within the contract. Westpac would agree to Australia Post providing these details to the Committee. Are you happy to share those details today or on notice?

Mr Graham: No, we are not. Those are commercially confidential. We have a number of agreements with many banks and institutions. They differ from bank to bank. That would disclose what we believe is
commercially sensitive information.

Senator ROBERTS: Westpac is happy for you to disclose their contract.

Mr Graham: Again, they may be happy but that’s one side of the contract. We have contracts with over 81 financial institutions and would not be comfortable sharing that sensitive information.

Senator ROBERTS: I asked the Commonwealth Bank the same question and also on notice received the same reply, as one would expect from an oligopoly. Are you able to share the Commonwealth Bank’s community representation fee today or on notice?

Mr Graham: No, Senator. We will take the same approach to that. As I say, we have many contracts with many banks. It is commercially sensitive. Disclosing what one bank pays versus what another bank pays would create commercial risk for Australia Post.

Senator ROBERTS: How so? The bank is happy.

Mr Graham: In that we are negotiating with 81 different companies and, if they were aware of what other companies are paying, that would put us under a very difficult commercial situation.

Senator ROBERTS: Show them the high-price contracts.

Mr Graham: It would be good if we could do that, but it’s unfortunate the way that the negotiations would work.

Senator ROBERTS: It would help you if you picked the top one. Are you happy with the fees you’re receiving from your banking partners in Bank@Post for providing their customers with services?

Mr Graham: When the Bank@Post agreement was put in place three years ago, the scope of that was for what we would call rudimentary or very basic consumer banking services—the ability to deposit some money and take out some money. It’s fair to say that since that service has been put in place and since we’ve seen an increase in the number of bank closures the pressure that has been placed on our post offices that provide Bank@Post has increased. Customers are looking for a broader scope of services. Small businesses particularly feel that they’re not able to access what they would traditionally access through their banking branches. And the provision of cash has become an issue. Whilst a lot of people say cash is going to die, we certainly don’t see that, particularly in certain demographics and also in certain neighbourhoods where cash is still prevalent.

When we were set up, we were never established, from both a physical and a service perspective, to deal with cash. We’re happy to extend the range of services we provide to our customers at Bank@Post, be it small business or the provision of cash, but we would need that to be funded by the banks. A good example is Coober Pedy. It is a cash town given the nature of its work. We are now flying cash into that town on a weekly basis because there are no banks remaining in Coober Pedy.

Senator ROBERTS: I’m very pleased to hear that you’re supporting cash and keeping it alive. A lot of people are starting to swing back now, because they know it’s essential for freedom. Would Australia Post like to offer a wider range of banking services from an existing partner, such as Suncorp? If so, what services would you like to provide?

Mr Graham: As I referred to in my previous answer, we are seeing an increasing desire by regional towns, particularly when we are the only banking service remaining, to increase the range of services for small business—be that cash floats for the local hairdresser or the local coffee shop. One example recently was a footy team and the Country Women’s Association both ran a gold coin fundraiser over a weekend and our post office was inundated with 1,800 gold coins on the Monday. It was never equipped to handle that type of cash. We see there’s an ability for us to increase the range of services we provide, certainly for small businesses, and for the provision of cash for those small businesses. However, that would need an investment—in some cases in physical infrastructure, for safes and security, and also additional systems and training for our team—which we are prepared to do. That would obviously require support from the banks to enable those services to be extended.

Senator ROBERTS: So you’d welcome something like Suncorp, which is for sale right now? It’s sale to ANZ was blocked.

Mr Graham: We provide services to Suncorp today through Bank@Post—they are a Bank@Post customer—and 81 other financial institutions.

Senator ROBERTS: I’m not asking you to commit to Suncorp or anything like that, but does the concept of having a bank with branches already, albeit not as many as you have, appeal to you?

Mr Graham: That’s a question of policy, which is for the government. We’re very happy to provide our over-the-counter services, which we are well-equipped to do, certainly for basic banking services. But as I said, if we were to extend the range of those services we would need to look at those post offices on a case-by-case basis. A town in the Snowy is another case in point where the last bank left and our post office there does not have disability access, so, again, that challenge comes on Australia Post and we work with the banks to try to solve that. We see over-the-counter services and providing Bank@Post services, particularly in regional and remote areas, as essential services and we continue to be invested in those services.

Senator ROBERTS: Something Christine Holgate did a very fine job of doing was to listen to and address the problems of the LPOs—the licenced post offices. We haven’t heard much from them lately, so that is probably a pretty good sign, but I’d like to know what you think of your relationship with the LPOs. How’s that going? They’re fundamental.

Mr Graham: Yes, they are. They make up more than two-thirds of our branch network. They are partners in our network. We deal with both the key associations. I think our relationship is a very positive one. We are very transparent on what we are doing, the investments we’re making. We’re currently rolling out our PostPlus new point-of-sale system through every post office in the country—the largest single investment that Australia Post has ever made, over $250 million. This will create efficiencies for both our corporate and licenced post offices, and also create a better service experience for our customers.
Our relationship with them is healthy. We certainly listen to them. We spend a lot of time out in their post offices, understanding their needs and their challenges. I also spend a lot of time out; it’s one of the best parts of my job. But we also see, in certain areas, where they are financially challenged because of the reduction in foot traffic, because of the digitisation of services, and, as I mentioned in my opening address, certainly metropolitan areas where there can be significant overlap, we do see cannibalisation of licenced post offices by their fellow licensees in some of those areas. It is a changing financial environment for many of them, and we look to continue to support them where we can. Bank@Post certainly helps, as does the growth we’re seeing in our parcel business, and also investing in new systems which helps them become more efficient and better at serving their customers.

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Will Australia Post apologise to Christine Holgate?

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A damning 255 page report has slammed the board of Australia Post and found that Christine Holgate did not breach any policies. We know from the small businesses that operate licensed post offices that Christine Holgate was well respected and had a reputation for actually getting problems fixed. I questioned Australia Post at Senate Estimates.

Transcript

[Malcolm Roberts] Disappointing to note that the CEO of Australia Post, the former CEO of Australia Post, Christine Holgate, has taken up a new role rather than pursuing a return to work in Australia Post. I’ll explain more about why it’s disappointing in a minute. In denying Ms. Holgate “her legal principles of procedural fairness and natural justice,” can Australia Post employees, licensees, and customers expect the same treatment as she got?

Senator, I’d prefer not to comment on matters dealing with the board and that have been very well dealt with, with the inquiry and the 255 page reading that we’ve received yesterday. But I think those matters should be kept entirely separate from the matters that happen on a day to day basis at Australia Post. I think that they’re very different matters-

[Malcolm Roberts] I can imagine you-

Those matters have been well covered.

[Malcolm Roberts] I can imagine you are advocating that, but the description of your board chairman’s behaviour in giving evidence to both Senate estimates and committee’s subsequent inquiry has shown him to, at best, have an appalling memory, and, at worst, at being deliberately evasive and misleading. I’ll just relate a personal example, personal interactions with the LPOs, because this issue about what happened to Christine Holgate goes well beyond Ms. Holgate. It goes to the goes to Australia Post. The ministers have done enormous damage, I believe, to Australia Post and to the LPOs. Now I’ve been pursuing issues for the LPOs strongly and vigorously. We’ve gone out into the regions and we’ve listened to people in the city LPOs, and they have told us, for years, that their needs have not been met. They’ve not been listened to. They’ve been abused. They’ve been trod on. So prior to Ms. Holgate becoming the CEO, that’s the way the LPOs are treated. And what stunned me, was the LPOs is just swung straight in behind Ms. Holgate. Very, very strongly behind her. And they said that, she actually told me later, that due to my questions in Senate estimates, she said, “There’s a problem here.” And she went out and listened. And the LPOs were very, very grateful for that. And they swung in right behind her. Angela Cramp from the LPOs, very strong advocate. The LPO is we’re writing letters to us, saying how much they appreciate Ms. Holgate. They’ve never had that kind of support and now they’ve lost it. And the way she’s been dismissed has left a lot of people wondering what’s going on in Australia Post. That’s why it’s so important.

Senator, if I could try and separate those issues and matters that have been dealt with well by the inquiry in the former CEO. But I could give you my, having grown up on a farm myself, and coming from regional Western Australia, and joining Australia Post because of its far reach into regional and rural Australia, I appreciate, as does Ms. Sheffield, who looks after community and consumers and all of the LPOs, how important the LPOs are to Australia Post. We are absolutely committed to the LPOs. And as Ms. Sheffield said, the first round of payment reform was what 55 million increase in additional payments. So there is a significant amount of support within Australia Post here at this desk today and back in the offices right across Australia Post. So, we do appreciate everything the LPOs do. They’re a very important part of the Australia Post. And will be for a long time to come out, I hope.

[Malcolm Roberts] But we’ll be assessing it by listening to the LPOs, as to what happens, because they are Australia Post in many communities. And they’re the community, they’re the heart of many communities. So-

Senator, and just take that on board. When I sat down with the chair of the Australia Post Advisory eh-

[Ms. Sheffield] APLAC.

APLAC. I always get the acronym wrong. Outside his LPO and discussed matters, and we are listening to LPOs every day. It’s very important.

[Malcolm Roberts] Well, I just had a text message from Angela Cramp. And she’s saying, “He has had no contact with LPOs since he took over the role. He’s not responded to anyone.”

From Ms. Cramp-

[Malcolm Roberts] To me.

Directed at me?

[Malcolm Roberts] Yes.

I haven’t had direct contact with Ms. Cramp. As I said, I sat down with the chairman of APLAC, and I’m out in post offices, corporate and LPOs alike. So, as Ms. Sheffield, on a regular basis.

[Malcolm Roberts] We hope it doesn’t go back to the way it was pre-Holgate.

Can I also add to that, Senator? We have worked very hard to build those relationships with licensees. We understand and value licensees incredibly. This week, we had an APLAC board where we brought everyone together, which Angela Cramp is a National Director on. We, you know, we’ve just finished six weeks of road shows, where all licensees were invited to the communities and we will be coming, well hopefully, COVID permitting, in Woolongong next week for, you know, to ensure that we hear from our licensees because we agree with you. We have to listen. There is a lot of change happening in our community. There’s a lot of change to their business, and there’s a lot of change that needs to be there to support them. And whether it’s in looking at what products they’re offering, outlets, payments, lots of consultation, and we really do value the input that they have, in both associations, both LPOG and POALL provide a lot of input and provide, not just to myself, but to teams of people at Australia Post that really are there to do the best. And we don’t want anything to go back. It won’t go back. This payment reform is written. It’s an agreement. It is there to stay, and the next phase will be an agreement. So, really it is, it is there to really support them and help them to grow. Because we know when LPOs thrive, Australia Post thrives. And that’s why we created the payment reforms so that they’re not, it’s not a cost, it’s actually a cost of sale. It’s based on growth. So as e-commerce grows, they grow, because they get a greater share of parcel revenue, which they never got before. So the whole basis of how that set up, actually, is there to drive their growth and ensure that their businesses grow.

[Malcolm Roberts] Right. And as you said, it didn’t happen before. Thanks to Ms. Holgate, it has happened. So we’ll be watching very, very closely because we don’t want to see it go back to the previous days. Will you be implementing Senator Pauline Hanson’s recommendations as part of the committee’s recommendation and report that came down yesterday that the Australia Post chair, Mr. Lucio Di Bartolomeo, be removed from the board, given the scathing conclusions and comments about his behaviour?

Senator, thank you very much for that question. I don’t think it’s the responsibility of the acting group chief executive to comment on the chair. The chair has put a statement out yesterday afternoon saying he’s committed to continuing to lead Australia Post. So, but it’s not for the acting management, and as acting CEO to comment on, on that.

[Malcolm Roberts] I’ve had other questions on services so I’ll put them on notice.

That’d be great.

[Malcolm Roberts] Thank you very much.

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Does Australia Post care about Mum and Dad LPOs?

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Licensed Post Offices (LPOs) provide important services especially in regional towns. Unfortunately, they’ve been overlooked in a number of the changes to the way Australia Post operates.

Transcript

[Malcolm Roberts]

Thank you chair. And thank you all for attending today. Is Australia Post considering selling off its profitable parcel post business? And please advise what discussions, reviews and planning has and will occur in relation to the parcel post business?

Senator, that would be a matter for government. So we’ll have to defer to…

[Lucio Di Bartolomeo]

If I could just respond from the chair’s and board’s perspective. There has been no discussion, no plans, no undertakings to prioritise any aspects of Australia Post business. Certainly in the time that I’ve been there. And while we’re on that time, Can I correct the figure that I gave earlier? I was appointed on the 22nd of November not the 14th of November.

[Woman]

Thank you.

[Lucio Di Bartolomeo]

The 14th was the date that the press release was put out. I apologise for that.

[Malcolm Roberts]

So you can rule out that there’ll be a sale of the parcel post?

[Lucio Di Bartolomeo]

Correct. Correct.

I mean, I…

[Woman]

So can I.

[Malcolm Roberts]

Thank you.

Does Australia Post consider it has a responsibility to provide a possible, a profitable business model for licensees of community post offices?

[Lucio Di Bartolomeo]

We certainly believe we have a responsibility to maintain viable partners in all the business that we undertake. Both at the contractor level and at the LPO level, yes.

[Malcolm Roberts]

So you will look at their services through their eyes.

[Lucio Di Bartolomeo]

Absolutely.

[Malcolm Roberts]

The chair of Australia Post commissioned a review by the Boston Consulting Group to inform the board and the CEO. Why were the most heavily invested stakeholder group, the licensees, not engaged and or included in the sharing of the outcomes, recommendations for that review.

[Lucio Di Bartolomeo]

Senator, if I could just correct one point. The Australia Post board did not engage BCG. This was an independent investigation by our shareholders, shareholder ministers and we supported the investigation. But we did not engage nor ultimately conclude any position on that review.

[Malcolm Roberts]

From whom do I request to get a copy? Because it’s been out since I guess… Sorry.

[Woman]

We’ve already taken public interest immunity on that report, Senator Roberts. The cabinet’s explicitly considered the executive summary of their BCG report. The full report though, as a usual practise, was also available to cabinet and I consider by a number of ministers. But the report’s expected to be given further cabinet consideration in the context of ensuring that Australia Post has a sustainable future.

[Malcolm Roberts]

Could you please advise the status and next steps being taken by Australia Post with licenced post offices, LPOs, to progress payment reforms.

[Lucio Di Bartolomeo]

Senator, thank you very much for the question. I may just defer to Ms. Sheffield, who heads up our community and consumer area and ask her to come to the desk. And outline we are about to kick off on the payment review process . So, Ms. Sheffield.

[Nicole Sheffield]

Thank you Mr. Boys. Thank you, Senator. Nicole Sheffield executive general manager, community and consumer. Thank you Senator for that question. We work very closely with our licensees, our licensee partners and associations. The payment reform itself, we have had one consultation with LPOG. And we have a first consultation with POAAL, the other group later this week. Once we understand the principles and agree what are the areas that we will be looking at, then we we’ll make for some recommendations. And start working that including, as per the first lot of payment reform, looking at those payments per outlet. Because when you have so many outlets, 2,580, there are a lot of impacts. So when you make any changes to payments there’s going to be some impacts that we want to make sure that we understand across the entire network. So that requires a lot of modelling, a lot of consultation. As you know, the first payment reform was very successful and introduced $50 million worth of extra payments in the last two years to licensees. And that was all about ensuring that they were paid for parcels and for scanning. The second lot of payment reform is going to focus on community representation, and the very important role that they play in that. But also looking at our identity services and financial services. I feel very confident that before the end of this financial year we should have some really good parameters to move forward.

[Malcolm Roberts]

So it has a budget. Thank you for that. And it’ll save me, giving my preamble for the next question. Has a budget allocation been made for phase two reform implementation, which we understand is expected to begin shortly. And what is the budget allocation for phase two? When do you anticipate it will be commenced and then implemented?

[Nicole Sheffield]

So budgets at the moment have not been concluded for next financial year. So we’re in the process of discussing within the organisation, all of that. But I can tell you confidently Senator, there will be budget allocation. We’ve been discussing this and just like anything we will put aside the required amounts. And that’s part of the reason we’ve started the discussion so early this year to make sure that we allocate the appropriate amount.

[Malcolm Roberts]

And that would come with extensive consultation with the LPOs?

[Nicole Sheffield]

Absolutely.

[Malcolm Roberts]

Okay. In order to achieve sustainability for LPOs, does the significant change in volume between letters and parcel post require a review of the financial relationship between licence, with licenced post offices. Especially if, yeah, that’s all I need to say.

[Nicole Sheffield]

Yeah. Look, we’re always ensuring the viability of our licenced post office partners. We know how important they are for us to deliver our community service obligation. But actually they’re, you know, the face to our community to regional and rural Australia. Their viability is critical. And just as we’ve seen, COVID has created an e-commerce boom that none of us expected. We hoped, but none of us expected that it’s changed the financial model completely for our post offices. Because all of a sudden their revenue drivers are significantly more coming from parcels than we’ve ever seen. And so it really is constantly working with them looking at what products, services they are offering to their communities. What arrangements that we have, what opportunities we can have to introduce new products and services that will drive transactions and foot traffic for them. And I think it’s something that we’ll just constantly need to be looking at and working with them to look at what we can do to grow.

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