Nationals' John Williams rejects speculation over Australia Post privatisation arguing that no-one would want to buy a 'dead dog'

The privatisation of Australia Post could further harm the viability of post offices in rural areas, costing country communities their “heart”, according to the Coalition senator leading an inquiry into the organisation’s performance.

The Nationals senator John Williams greeted reports of a possible sell-off by arguing that Australia Post provided an essential, monopoly service that should stay in government hands. Williams also doubted whether a private buyer would be interested in the declining mail delivery business, asking: “Who wants to buy a dead dog?”

The speculation follows a report by the Australian Financial Review that suggested the head of the Australian Competition and Consumer Commission (ACCC) had urged the prime minister, Tony Abbott, to “sell off assets such as Australia Post and Medibank Private and push for the privatisation of state-owned energy companies”.

The ACCC chairman, Rod Sims, has since distanced himself from the report, saying his comments in an interview advocating asset sales were focused on the energy sector.

The Coalition said before the election it would sell Medibank Private and the government has launched a scoping study on the move. Labor has warned the government against contemplating privatisation of Australia Post, saying it would represent a broken promise.

Williams, who is heading a Senate environment and communications legislation committee inquiry into Australia Post’s performance and the role of licensed post offices in regional and remote areas, said the organisation’s finances were “a disaster” and he doubted a buyer could be found for the postal network.

“When it comes to posting a letter it’s a monopoly and I regard that as an essential service and I’ve always had an opinion that any monopoly service should remain in the hands of government,” he said.

Williams said Australia Post’s parcel business was doing well, but the sale of that part of the organisation could put further financial strain on existing licensed post offices, which are owned and operated by licensees.

Australia Post has 4,429 retail outlets, 2,561 of which are in rural and regional areas. Australia Post told the inquiry the accelerated decline in the community’s use of the letters service threatened its ability to remain profitable in the future. It sought letter price rises, the ability to provide more government services, and greater commercial freedom.

Williams said people who had bought post office franchises had already seen the value of their business decline as the volumes of letters sent went down. “My belief is if you lose a post office in your country community you lose the heart of your community,” he said.

The committee’s interim report, issued last month, noted that many licensed post office operators were already “struggling to survive to the point where some off-site employment is undertaken to fund their operation”. The report said Australia Post had made a submission to the government’s commission of audit asking for approval to offer a wider range of “trusted services” on behalf of the government.

The government confirmed in October the commission would consider whether Australia Post outlets could deliver Centrelink services. The commission is looking across areas of government for cost savings and potential asset sales.

A spokesman for the communications minister, Malcolm Turnbull, said on Monday that the government had no plans to privatise Australia Post.

Sims told the ABC that private ownership of assets provided better incentives for better performance.

"If all you're after is maximum efficiency then there's no question that you'd have those assets owned by the private sector," he said.

"If you're continuing to own them by government, then that's because you've got some social objective to achieve. Now, if you have a social objective, it's worth specifying what that is, and I suspect there's probably more direct ways to achieve that social objective."

But Sims said his comments were focused on the energy sector, which he knew fairly well. “I'm quite confident that had the network assets in New South Wales and Queensland been owned by the private sector we'd probably have lower electricity prices than we do now because we would have had more productive use of those assets,” he said.

“Australia Post, that's really an issue for government … I was making a general point this morning, and I'll really leave it at that. I think there are direct experiences you can draw from the energy sector, but I've really got no parallel from which to comment on Australia Post, or Medibank Private for that matter.”

Labor’s transport spokesman, Anthony Albanese, said post offices in regional or small country towns provided a much more important role than being the place where letters were posted.

“The post office can be the banking centre, can be the centre where families pay their bills, can be a key component of those local communities,” Albanese said.

“Without cross-subsidisation and without Australia Post playing the role that it does – which would be diminished if it were broken up and put into private hands – what we would see is a real loss in those regional services in particular.”

In its submission to the Senate inquiry, the Department of Finance highlighted how Australia Post’s loss-making letter business was cross-subsidised by its profit-making parcel delivery business.

“Letter volumes continued their steep declines in 2012-13, with addressed letter volume declines of 6.4%, resulting in the monopoly letters business incurring a trading loss of $147.4 million in 2012-13. Inclusion of regulated international mail increases this loss to $218.4 million. Due to the strong performance of its parcels business, Australia Post recorded an overall profit after tax in 2012-13 of $311.9 million,” the submission said.

The Department of Finance said other countries, grappling with similar challenges facing postal operators, had removed price controls on postal stamps, changed community service obligations, integrated parcel and letter delivery networks, diversified products, and reconsidered government ownership.

“Full or partial privatisation of postal services has occurred in Germany, Austria, the Netherlands, Belgium and most recently in the United Kingdom. Benefits of privatisation in these jurisdictions have included greater access to capital and increased flexibility to innovate, take on commercial risk and reform cost structures,” the submission said.

Labor’s acting communications spokeswoman, Michelle Rowland, said Turnbull gave a written undertaking in May last year that the Coalition had no plans to privatise Australia Post. She said the commission of audit would push for “more extreme outsourcing, hurting families across the country”.

The acting Greens leader, Richard Di Natale, said privatisation was "always a very lazy way" to try to balance the books.

The finance minister, Mathias Cormann, said the Coalition had a policy to sell Medibank Private and would undertake that process "carefully and methodically".

Cormann said while the Coalition did not have a policy to sell any other government assets, it had asked the commission of audit to review the size and the scope of government and the opportunity for increased efficiencies.

"In that context we have asked them to make recommendations on whether there are any further sensible opportunities for privatisation," he said in a statement on Monday.

"We will not speculate on whether the Commission of Audit will recommend further privatisation opportunities. We will carefully consider any recommendations from the Commission of Audit after they have been received in late January."

Total government equity in Australia Post in mid-2013 was $1.7bn.