Big increases in telephone, postal charges

Press, 21 February 1986, Page 1

Big increases in telephone, postal charges

By

MARTIN FREETH

in Wellington

New Zealanders will pay the Post Office a 22 per cent average rise in charges to keep it profitable in a period of huge capital investment.

The Government announced higher telephone, telex and postal charges yesterday, to stop the Post Office going “massively into the red” in the coming financial year under the impact of sharply rising interest costs and a wage bill inflated by the recent State pay round. Postal charges will rise from May 1, to 30c for a standard inland letter and to 45c for an airmail inland letter.

The two-monthly rent for a home telephone will rise $6 to $41.50 from May 16. The range of other inland and overseas toll charges, and telex calls and rentals will rise from April 1.

The Postmaster-Gen-eral, Mr Hunt, described the increase as the absolute minimum required after an average rise of only 7 per cent over the last four years. At a news conference, Mr Hunt and the Minister of Finance, Mr Douglas, presented carefully prepared explanations for the increases. They laid some of the blame with the

previous Government for neglecting investment in the Post Office’s telecommunications services.

Estimated capital spending of $7OO million was required in the coming financial year in the face of a crisis in telecommunications, Mr Hunt said.

The higher charges reflect the Government’s drive to ensure that State trading bodies of which the Post Office is the biggest, are run commercially, achieving adequate returns for their investment.

Without the increases, the Post Office would have shown a $4O million loss in 1986-87, Mr Hunt said.

That would follow an after-tax profit in 1984-85 of $209 million, and a projected profit in the present financial year of $l5O million.

The loss foreseen in the coming year would have meant the Post Office could not contribute a dividend to the Government as it had done in each of the previous three years.

As well, it would have had to more than double its borrowings in 1986-87 to $750 million.

Mr Hunt said the Post Office had been particularly hard hit by the pay round.

“The Post Office’s 39,000 employees, amounting to 3 per cent of the total labour force, make this a particularly labour-intensive business.”

The impact was greatest on postal services where wages were 60 per cent of total costs. Even given the larger income from higher charges, postal business would lose at least $35 million in the coming year, Mr Hunt said. •

The Post Office’s pay bill would also be boosted by the need for extra staff arising from buoyant demand for some of its services, he said. In 198687, Post Office staff costs would rise about 25 per cent.

Mr Hunt blamed National’s wage freeze, and sinking lid policy on staff numbers for a rundown in Post Office employment. "New hirings of staff who require training impose considerable net costs on the system, to restore acceptable levels of both staffing and skills,” he said. The Ministers also indicated that big organisational changes were on the way to increase Post Office efficiency.

The inclusion of the Post Office in. Mr Douglas’s review of trading activity efficiency

throughout the State sector is intended as a policy consistent with the Government’s decision to raise charges now rather than fund more of the big capital programme from borrowing or tax

The increased charges would still mean the Post Office financing more than half its capital investment programme in 1986-87 from borrowing. In that year, total borrowing for investment is expected to increase to about $l2OO million, compared with $563 million in March, 1985.

Mr Hunt said interest payments in the coming year were expected to rise 52 per cent above the 1985-86 level.

When the higher costs are offset by increased charges and efficiency gains in serving a growing demand s for its services, the Post Office is expected to lift its total contributions to the Government in the coming year.

In 1985-86, Mr Hunt said, the contribution to the Government was expected to be $172 million, being dividends ($93 million) and tax on earnings ($79 million). In 1986-87, tax and dividends are forecast to rise to about $2OB million. ~ Further reports, pages 2,4