RUBY:

From Schwartz Media, I’m Ruby Jones this is 7am.

The federal government has announced an investigation into the National Postal Service, Australia Post, following revelations of exorbitant bonuses paid to executives. But as the investigation gets underway, a deeper crisis at the organisation is threatening to jeopardise the way it operates.

Today, senior reporter for The Saturday Paper Rick Morton on what went wrong at Australia Post.

Archival Tape -- News Reader 1

“Well Australia Post is now in a world of pain. And frankly it's high time a spotlight was shone”

Archival Tape -- News Reader 2

“Today, the government acted to remind the company who’s boss, as it reacted in fury to the latest extravagance.”

Archival Tape -- Scott Morrison

“This all happened within an hour Mr Speaker, so appalled and shocked was I by that behavior…”

Archival Tape -- Newsreader 3

“Calls are growing for the boss of Australia Post to quit…”

Archival Tape -- News Reader 4

“Ms. Holgate will step aside and the board will fully cooperate with the investigation.”

RUBY:

Rick. Last week, Australia Post's Chief Executive was fairly sensationally stood down from her role. So what happened?

RICK:

So last week, Australia Post's CEO Christine Holgate faced a pretty tough grilling at Senate estimates.

Archival Tape -- Senator

“Ms. Holgate, do you wish to make a short opening statement?”

Archival Tape -- Christine Holgate

“I do please.”

RICK:

On Thursday, Labor Senator Kimberly Kitching asked Holgate if she rewarded employees for clinching a deal with the Commonwealth Bank, Westpac and NHP about banking services at their Post Offices.

Archival Tape -- Christine Holgate

“There were a small number of senior people who'd put an inordinate amount of work in, and they did receive an award from the chair, myself and on behalf of the board.”

Archival Tape -- Senator Kimberly Kitching

“And what was that award?”

Archival Tape -- Christine Holgate

“They got watches.”

RICK:

And she confirmed that they had been rewarded with Cartier watches valued at about 5000 dollars each, or almost 20,000 dollars for four people.

Archival Tape -- Senator Kimberly Kitching

“You spent 12,000 dollars on watches and you can't tell me which credit card you put that money on.”

Archival Tape -- Rodney Boyce

“That's... that's correct.”

RICK:

But neither Holgate nor Australia Post Chief Financial Officer Rodney Boyce could actually clarify whether the designer brand timepieces were purchased using the CEO's corporate credit card, which at that point had amassed three hundred thousand dollars of expenses in a single year.

RUBY:

Wow.

RICK:

And within hours of the revelation, the government had announced an investigation into the governance of Australia Post.

Archival Tape -- Scott Morrison

“The independent investigation should look into the conduct of the board members and their governance, as well as the actions of the management and the executive.”

RICK:

And the government instructed the board to ask Holgate to stand aside.

Archival Tape -- Scott Morrison

“Now we are the shareholders of Australia Post, Mr Speaker, on behalf of the Australian people. She's been instructed to stand aside. And if she doesn't wish to do that, Mr Speaker, she can go.”

RICK:

It was a stunning development, but one that pulled focus from a deeper existential crisis facing the postal service, which has been unfolding behind the scenes during the Covid-19 pandemic.

RUBY:

Okay, so what is this deeper existential crisis that the postal service has been facing?

RICK:

So there’s one key kind of structural area that we need to be aware of is the fact that even before the pandemic, letters - you know, actual handwritten letters that people sent in the post - had been declining massively already at Australia Post. Covid-19 accelerated that and basically just saw a complete collapse in the letter side of the business.

But on the other hand, the parcel business was going through the roof because people were stuck at home ordering things and not just ordering small things, but they were ordering desks and exercise equipment and big heavy things, according to Christine Holgate, which necessitated a kind of a complete rework of how Australia Post kind of delivered those items.

Archival Tape -- Christine Holgate

“Senator, as we've gone into Coronavirus, it's not just the number of parcels, it's the size and weight. And that is actually you can't carry many large parcels on the back of a motorbike…”

RICK:

And it wasn't set up to meet those configuration demands at that point in time. And they still have these legal obligations despite the collapse in the letter business to deliver them.
So they couldn't cut back on that, to redeploy the workforce to help with the parcels, unless they had intervention from the Australian government.

RUBY:

Ok. So did the Australian government intervene?

RICK:

Well, that's where the Communications Minister, Paul Fletcher, comes in. So he unilaterally, basically relaxed regulations that set these delivery standards for Australia Post and that allowed the National Carrier to reduce the frequency of post in metropolitan areas during the pandemic, basically pause the priority mail service and delay interstate deliveries.

Archival Tape -- Paul Fletcher

“The facts are very clear that Australia Post has seen a sharp increase in the percentage of parcels being delivered and a sharp decrease in the number of letters being delivered. And that is why we have provided temporary fixed term regulatory relief to Australia post so it is able to redeploy Posties.”

RICK:

And then that gave them, you know, about 2000 extra postings freed up their time so that they could be put into vans to deliver parcels rather than spending every day delivering letters on bikes. And that made sure the company made a profit this year.

Archival Tape -- Christine Holgate

“These parcels now represent 61 per cent of our group revenues.”

RICK:

So Christine Holgate told Senate estimates hearing on Thursday that the profit before tax was up 30 per cent on its targets.

Archival Tape -- Christine Holgate

“And we were pleased we avoided a loss, which so many of our international peers have done. I thank the committee for the support of the temporary regulatory relief. It has been critical in helping us deliver these…”

RUBY:

Right - so this relaxing of regulations - that has meant both that people have been able to get their parcels, and has also meant that Australia Post turned a profit? And all of this has just brought more scrutiny onto the organisation’s leadership?

RICK:

Well, yeah. But it's actually Australia Post decision to pursue millions in executive bonuses in a year when so many Australians found themselves in financial hardship that has attracted strong criticism,

Archival Tape -- Senator

“So where's the remaining 50 million?”

RICK:

and that's something senators were very keen to find out more details about last week.

Archival Tape -- Senator

“In the context that we're all struggling within right now, yes, I think it's a bit on the nose it just leaves a really bad taste in your mouth, doesn't it?”

RICK:

You know, and Christine Holgate said she believed the public understood her company had served the community well during the pandemic and that's why executives deserved these bonuses. And it's you know, symbolically, it's just not a good look at all. And, you know, it helps the public understand, I think, some of the broader missteps and misjudgments along the way. But the thing is, these new regulations that they've been relying on to help deliver the parcels faster and turn a profit could be about to be overturned in the Senate. And that's the much bigger story here.

And the one politician who seems to hold the key vote to the future of how our postal service operates is One Nation leader, Pauline Hanson.

RUBY:

We'll be back after this.

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RUBY:

Rick - we’re talking about the future of Australia Post… it recently was granted a relaxing of regulations, which means they could turn a profit… but some of that profit has gone to bonuses and watches… so what does all this mean for the way forward for the service?

RICK:

So there is concern from some senators that Australia Post isn't operating as effectively as it should be.

Archival Tape -- Senator

“Unanimously committee members held to be a concern regarding the way in which Australia Post was responding to its parliamentary responsibilities.”

RICK:

Labor is concerned that the board is stacked with people aligned to the Liberal Party, including a former senator and former federal party director and a former state party director.

Archival Tape -- Senator

“And can I ask, is Mr. Tony Nutt a non-executive director on the Aus Post Board? Is he a current or a former member of the Liberal Party?”

Archival Tape -- Paul Fletcher

“I don't know ... the Post doesn't maintain a record of the political affiliations of its directors or employees.”

Archival Tape -- Senator

“Is it ever discussed at board meetings that Mr Nutt is known by some as an ‘iron fist in a velvet glove’? Or as the Svengali?”

RICK:

And some Liberals are concerned about recent regulatory changes and recent revelations around bonuses just won't help that picture at all.

So basically, Australia Post is running out of friends in parliament.

When the Communications Minister, Paul Fletcher, made that unilateral decision to relax the Australia Post service delivery standards, it did not require a vote in the Senate. But the temporary provisions can be removed by one.

RUBY:

Right so, does that mean that the Senate could vote to reverse this relaxation in regulations that Australia Post recently was granted?

RICK:

That's what's on the table at the moment. And it's a dynamic that renders every vote crucial for the future operation of Australia Post. And because of the makeup of the Senate, one of the key deciding votes could be Pauline Hanson and One Nation. And interestingly enough, it seems like Australia Post is very conscious of how the future of their organization does actually lie in Pauline Hanson's hands. And there's been a couple of very fascinating stories of the past few months that actually demonstrates this

RUBY:

Really? Tell me more, what has Australia Post been doing involving Pauline Hanson?

RICK:

So first in July, Australia Post was caught up in a battle to deliver more than 100 stubby holders sent by Senator Pauline Hanson to residents of Melbourne's locked down public housing towers. So if you remember, Hanson had just lost her commentary spot on Channel Nine's Today show after she racially abused the residents of the towers in relation to the Covid-19 outbreaks.

Archival Tape -- Pauline Hanson

“They're actually alcoholics, are they? They're being looked after that way. They're actually getting paid extra money. Why isn't getting paid extra money?”

RICK:

And the stubby holders declared. I've got the guts to say what you're thinking. And reportedly came with a note from Hanson that said, ‘no hard feelings’. Now, given the tensions and the extraordinary situation of the tower lockdown. Melbourne City Council tried to stop Australia Post from delivering them.

Archival Tape -- Public Housing Tower Resident

“I don’t believe anyone would’ve used that stubby. Personally, I would’ve thrown it away in the bin.”

RICK:

A report in The Age, said Christine Holgate, the CEO, called the police to intervene and get those stubby holders delivered. She later denied those reports and said that it was actually Sally Capp, the Lord Mayor, that called the police. So we have that situation. And then less than a fortnight later, Holgate and three other Australia Post executives flew to Queensland in the middle of lockdown to give Hanson a private tour of a parcel handling facility.

Archival Tape -- Senator

“And the tour of the Brisbane parcel facility by Senator Hanson. Was that then? Was there a connection?”

Archival Tape -- Christine Holgate

“None whatsoever.”

Archival Tape -- Senator

“Just coincidence.”

Archival Tape -- Senator

Oh I see, thank you very much.

RICK:

You know, Holgate said this tour, conducted despite those border closures, didn't have anything to do with the stubby holder scandal. But you can see that the company is keen to try and build a positive relationship with Hanson, whose vote could be quite crucial in the Senate.

RUBY:

OK, so Australia Post is potentially facing a pretty important vote which could determine its financial future and would also have impacts for all of us in terms of how we get our mail and our parcels. It turns out that Pauline Hanson could be key to this vote.

And while all of this is playing out the company's Chief Executive has been stood aside because of these millions of dollars in bonuses, including luxury watches, which were handed out to senior executives in the middle of a pandemic.

RICK:

That's it. That's it in a nutshell. And certainly I've been speaking to since this story came out, a few employees of Australia Post who were worried, even from the beginning, that this temporary relaxation of the regulations was really just a dry run for what the business needs to do to make money in the future, even when COVID has gone away. And so certainly they were ready with a few of these ideas.

They call it the alternative delivery model. And if they don't get that up, they can't do that. It's going to place enormous pressure on the business and how it operates and in such a climate, it's unlikely any other executives will qualify for any bonuses at all. And certainly not, you know, Cartier watches worth 4000 dollars, 5000 dollars a pop.

RUBY:

Rick, thank you so much for talking to me about all of this.

RICK:

Thanks, Ruby.

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RUBY:

Also in the news today:

Protestors clashed with police at the Djab Wurrung tree site northwest of Melbourne yesterday,

On Monday, a yellow box tree sacred to the local Indigenous community was cut down and removed from the site, which is being cleared for a highway.

The move sparked a response from protestors who occupied the site to prevent further tree removals.

And NSW Premier Gladys Berejiklian has flagged the possibility of easing hard border restrictions with Victoria as both states record low coronavirus cases.

Berejiklian said she wanted to open the Victorian-NSW border "as soon as we can".

I’m Ruby Jones, this is 7am. See ya tomorrow.