F.—l .

The dispute between the Commonwealth and the contractors relative to the rate of poundage to be paid as from the Ist December, 1900, for the conveyance of Australian postal matter has been satisfactorily settled by the Federal Government paying to the Oceanic Company a sum stated at between £6,000 and £7,000. Following on the cessation of the San Francisco mail-service the interprovincial service for the carriage coastwise of the San Francisco mails was discontinued. Vancouver Service. The contract between the Federal Government and the Union Steamship Company lias been extended for two years from July of this year on the existing terms, except that during the busy season the steamer " Miowora " will be replaced by a vessel which will reduce the time by twenty-four hours The new terms make it optional to terminate the contract at the end of the first year by giving four months' notice. It is understood that Brisbane is still to be a port of call. The present mail-time is twenty-two and a half days, and an improvement to twenty-one and a half days is to be effected by permanently replacing the " Miowera "in March next by the " Manuka," or a steamer as good. The right of the Commonwealth Government to terminate the contract on giving four months' notice as from July, 1908, is believed to imply that the service will have to be put on a permanent basis. A port of call at New Zealand is not mentioned in the present extension of the service, but negotiations to that effect will be resumed when the question of a further renewal comes up. It is understood that the present contractors may be prepared to enter into a three-years contract, to include a New Zealand port as a calling-place, and to provide a new fast steamer for the service in each of the three years. The Canadian Pacific Railway Company has also, it is understood, been considering the question of competing for the service to include New Zealand, to be performed by its fast 14,000-ton steamers of the " Empress " line now employed in the trade between Canada, Japan, and China. It should be of great advantage to secure a direct service from New Zealand to Gieat Britain by way of Canada if such can be obtained. The subject is now being considered by the British Government. Suez Service. In consequence of the unsatisfactory condition of the San Francisco service, arrangements were made as from the 7th Dcember, 1906, with the Union Steamship Company and the Huddart-Parker Company for a steamer to leave Wellington for Sydney every third Friday in order to make close connection with the European mail via Suez leaving Sydney the following Tuesday. As from the Bth February last the service was increased in frequency from three-weekly to fortnightly. Negotiations are now in progress for a weekly service. The transit-time scheduled between Wellington and London is, from October to March, thirty-eight days, and forty days during the rest of the year. These times are frequently bettered. New Zealand mails on arrival at Sydney are conveyed by express train to Melbourne, at which port they connect with the vessels of the Orient line. So far, payments which have been made for the carriage of mails by the Federal steamers have been at the Postal Union rates of 3s. T7d. per pound of letters, and 3'76d. per pound of other articles. Receipts and Payments on Account of the San Francisco, Peninsular and Oriental, and Orient Mail-services for the Year 1906San Francisco Service. Dr. £ a. A. £ s. d. S s. d. Payments by weight— On mails from New Zealand (fourteen voyages) ... 17,500 8 10 On mails from Fiji ... ... ... ... 38 18 2 17,539 7 0 Interprovincial service, mail agents, &c. ... ... ... 4,319 12 5 rp • , ! San Francisco to New York ... ... 4,300 7 5 iranslt cnarges {New York to Queenstown ... ... 1,822 10 9 27,981 17 7 Cr. Postages collected in the colony ... ... ... ... 14,388 16 2 Contributions from Fiji... ... ... ... ... 38 18 2 14,427 14 i Net cost to the colony ... ... ... ... £13,554 3 3 1,335,831 letters and post-cards, 633,199 books, and 1,248.415 newspapers were receired from, and 1,450,606 letters and post-cards, 184,923 books, and 222,965 newspapers were despatch vl to, the United Kingdom via San Francisco. The average time within which mails were delivered by the San Francisco service was : From Auckland to London, 3L79 days, as against 3039 in 1905 ; and from London to Auckland, 33.47 days, as compared with 3L06 days in the previous year. The shortest delivery was made in 29 days.

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