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New Zealand Post could slash its urban mail deliveries from six days a week to three, and wants a capital injection for its subsidiary KiwiBank from the Government.
Its chairperson, former Finance Minister Michael Cullen, says letter deliveries have been in a steady, ongoing decline and wants to reduce costs before an imminent Government bailout becomes a reality.
“For standard letters going into urban New Zealand, it would be very helpful if we looked at delivery perhaps three days per week because that enables us to make significant savings,” says Dr Cullen.
“Otherwise, in the next couple of years or so, the core postal system will move into a loss and I don’t think we can justify seeking a subsidy from the Government on the grounds this is a pure social service.”
Mail volumes were falling by 5 percent year-on-year, while the decline in the six months to the end of December 2011 was 7 percent, "which may well be the new norm", Dr Cullen says.
They have tumbled from 46 million in 1998 to eight million in 2012, and are forecast to drop to five million in 2018.
State-owned New Zealand Post has a Deed of Understanding with the Government, signed in 1998, which says it must deliver mail to New Zealand households six days per week, through the entire country at a standard cost.
Dr Cullen says this agreement, if not changed, will cripple the company and he is seeking an amendment to avoid the company going belly-up.
He has written a letter to State Owned Enterprises Minister Tony Ryall outlining the “fundamental changes” that are needed in the company.
“The business has reached the point where it can no longer just cut costs and rely on new product offerings to match falling volumes,” the letter stated.
“It is now clear to the board that the majority of short-term fixes have been exhausted.
He says the current networks of post shops around the country also needs to be modernised because the current outlook is very old fashioned.
KiwiBank, a wholly-owned subsidiary of New Zealand Post, also needs a capital injection from the Government, Dr Cullen says, in order to increase lending capabilities and upgrade systems it has outgrown.
“We would like to get into more areas like lending in the small business area, expand KiwiBank’s role as the only major New Zealand-owned bank,” Dr Cullen says.
“We understand that is a big ask and the ministers will want to be thinking carefully about that,” he says.
3 News/NZN