Mr Dan Dwyer
Divisional Secretary
CWU
Level 9/365 Queen Street
MELBOURNE VIC 3000

Dear Dan,

I am writing to thank you for the contribution that you and your colleagues made at the Australia Post Union Summit on 1 March.

This is the third occasion that we've held a Union Summit, and it's become a valuable forum for discussing the business issues that affect our people - and your members. It's criticality important that you are given this kind of candid, open-book insight into the challenges we face due to the digital disruption of our core business - and our strategic response to those challenges. Of course, it's also valuable for our senior leadership team to hear your forthright feedback on employment practices at Australia Post.

From my perspective, several key issues were raised at the Union Summit that we will need to bear in mind as we enter the formal bargaining period for our next Enterprise Agreement.

1. While our profitability has improved over the past two years, it remains low by historical standards and our business position is now much more challenging than it was when we finalised FWA2010.

2. Digital technology presents a major challenge especially in mail services, where the majority of our people work.

3. We are facing several financial headwinds - in 2014 and beyond - that threaten our future profitability.

• Our mail volume decline is accelerating beyond our forecasts (it's been declining 3-5% p. a. over the past four years; but we're now facing sharper declines of 6-8%).
• This decline is also being reflected in ongoing declines in the number of customers visiting our Retail network.
• We lost $185m in our regulated business last year - and that loss will keep growing as our mail volumes continue to decline.
• Our superannuation liability will also increase significantly in 2014 - up from $130m p. a. to $320m p. a. - due to changes in accounting standards.
• There are a number of other third-party costs (i. e. technology, accommodation and depreciation) that will be compounded in 2014, as we invest heavily in rebuilding our business.

We demonstrated that without continued cost management and investment in our growth opportunities, the business could quickly follow our international counterparts and slide into negative territory, damaging future job prospects.

Without doubt, cost management over the past three years has been greatly assisted by the hard work and commitment of our people. For this reason, it's criticalIy important that the EA2013 wage outcome (covering the 2014-2016 period)is both fair for our people and sustainable for our business. This next Agreement also needs to enable a degree of workplace flexibility that will help us boost productivity and offset some of our rising costs.

I was pleased to hear the genuine commitment from you and your colleagues to achieving back-to-back Enterprise Agreements, which would mean finalising this Agreement by July-2013. This will ensure the operational stability that is vital for the future of our business. In the short-term, it will enable us to maintain high customer service standards during our busiest time of year and, longer-term, it will give us the confidence we need to proceed with the $2 billion investment program that we discussed.

While we have our occasional differences, I think the Union Summit demonstrated that we also have a great deal of common ground. We both want to secure a financially sustainable future for Australia Post, with ongoing - and rewarding -job opportunities for the 30,000-plus Australians who work here. As we prepare to sit down for formal negotiations next week, I want you to know that I am confident we can find a genuine win-win outcome that is both fair and sustainable, while also recognising the valuable contribution made by our people.

Ahmed Fahour