Cost of stamps could rise Senate Inquiry reveals

THE cost of stamps will rise, regional post offices could start processing Centrelink payments and Australia Post could yet be privatised, a raft of documents filed with a Senate inquiry reveals.

As the government considers what to do with Australia Post, struggling from declining letter volumes and higher costs, submissions to a Senate inquiry into the corporation show the options available.

Among the options considered in a Department of Finance submission were network changes, privatisation and pricing "flexibility".

Despite the government saying it has no plans to privatise the postal service, the Commission of Audit may be forced to consider selling off the ailing asset to maintain the federal budget.

The Finance Department submission has revealed financial forecasts from Australia Post show the government business entity is expected to make no money for the government from 2015-16 on.

"Australia Post has advised that it will experience significant pressure on its profitability due to ongoing decline in letter volumes and it expects to make losses from 2015-16 onwards, with dividends to the Commonwealth reduced to zero," the submission reads.

The forecast that the corporation would be unable to deliver a return to the government in just two years comes despite its principal objective to make a profit.

A submission from the Department of Communication drove that message home, saying the company's rate of return needed to be "at least sufficient to justify the long-term retention of assets in the business".

To ensure its survival, the postal service has already proposed three initiatives; namely, increasing the price of stamps, taking over a "wider range of trusted services on behalf of government", and changes to limits on the company's "commercial freedoms".

It is understood the postal service, which operates more than 2500 outlets in rural and remote areas, could soon take over processing Centrelink payments, particularly in regional areas.

The Finance Department submission outlined five options available to ensure Australia Post's survival, based on similar experiences of the effects of "digital disruption" to overseas postal operators.

Those proposals include changes to pricing flexibility, product diversification, network changes, community service obligation changes and privatisation.

But the submission said that despite those options being available, most would need legislative reform, as well as significant additional capital funding just to keep operating.

As the Commission of Audit looks for further savings for the government and Australia Post forecasts being unable to deliver a return within two years without more capital or legislative reforms, privatisation is expected to remain on the table.

A spokesman for Communications Minister Malcolm Turnbull said on Monday the government had no policy to privatise Australia Post and the government is not commenting on the commission's recommendations until the report is released.