Mail service requires subsidy – NZ Post
‘We will in all probability need to engage with the Crown to discuss funding mechanisms . . . for satisfying the social obligations.’
NZ POST says it will probably need a subsidy from the Government if it cannot get approval to slash mail deliveries from six to three days a week.
It is also signalling a slowdown in Kiwibank’s growth after the Government refused to pay more capital in the near future to support the state-owned bank.
In a letter to Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall, NZ Post chairman Sir Michael Cullen said the organisation’s social obligations, set out in a deed of understanding, were being met despite increasing distribution costs and rapidly falling mail volumes.
If proposed changes to the deed did not go ahead ‘‘we will in all probability need to engage with the Crown to discuss funding mechanisms . . . for satisfying the social obligations’’, he said.
The State Owned Enterprises Act states that if the government wants an enterprise to provide goods or services to anyone it must enter into an agreement Sir Michael Cullen NZ Post chairman and in return pay for all or part of the cost – in other words, a subsidy.
The proposed delivery changes have gone out for consultation, and Communications Minister Amy Adams is expecting a report from officials soon.
Prime Minister John Key has already indicated an end to daily letter deliveries. Job losses from the change are tipped to be in the hundreds. Three-day-aweek deliveries would allow posties to cover two rounds on alternate days. The Government has sent a strong message to NZ Post that it is not prepared to pump more capital into Kiwibank soon as it tries to rein in capital expenditure.
In his letter to ministers, Sir Michael said that as a result of a new business plan adopted by Kiwibank in February it would no longer require extra capital from the Government in the short term.
To achieve that, the bank had ‘‘tempered the expected growth, particularly in the business markets’’, and pushed out the date it would achieve the level of tier 1 capital needed to satisfy Reserve Bank criteria.
But it assumed the bank could rejig its current mix of securities in a way that would not cut its credit rating or push up its cost of capital or borrowing.
‘‘If this assumption is not correct, this will have significant implications for the strategic programme,’’ Sir Michael said.