Australia Post will raise bulk mail prices by another seven per cent next month, as it tries to offset a $328m loss in its letters division last year, with mailing houses calling it ‘brutal’.

The monopoly mail carrier says the increase is an average of 5.5 per cent across all bulk mail products from March 2, but small-sized presort mail, which makes up about 80 per cent of bulk mail volumes, will rise by up to 7.3 per cent.

It follows rises of more than 13 per cent only 11 months ago and many in the industry expect them to become an annual or even biannual gut punch to business.

As a small relief, it proposes to introduce a three per cent discount for promotional mail batches of more than 4000 items.

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Small barcode direct tray mail delivery under 125g, which comprises up to 90 per cent of presort volumes and is the key product for printers and mailhouses, will rise by 7.3 per cent for same state and 7.1 per cent for interstate on regular delivery, and 6.8 and 6.5 for priority.

The two-speed system of priority and regular delivery introduced last year sees higher prices for better service – one business day for same state and four for interstate, verses 2-3 and 5-6 on regular.

Mailhouse owners say the choice between priority and regular varies by client, but is at about a 50/50 split by volume.

Small priority mail will now cost 65.2c to send interstate – barely less than the 70c normal postage, while regular will cost 57.6c. Same state is just over 2c less.

Print post, used to send magazines and catalogues, will rise an average of three per cent for regular and seven per cent for priority. Australia Post says 90 per cent of volume is sent on regular.

The proposed promotional mail service offers a discount of three per cent for promotional mail batches of more than 4000 items sent on regular delivery (which would reduce the rises to 4.1 or 4.3 per cent).

Australia Post says the product details are being finalised through an industry consultation process with the intention to launch before the end of the financial year.

Senders are expected to assess for themselves if an article is promotional or not and include two unsealed samples for inspection by Australia Post.

The difference between promotional and transactional is said to be fairly straightforward, including offers, advertising, or the promotion of a cause, and the vast majority of direct mail sent by printers would be covered.

Integrated Mailing Services managing director Buzz Borsitzky says the discount is a revival of the old advertising mail discount that was about 2.5 per cent when it was discontinued about 15 years ago.

“Australia Post does see the benefits of direct mail, and is trying to reduce the price increase a bit to encourage people to use it, but the increase is still brutal,” he says.

Borsitzky says volumes from his clients are falling by 13 per cent a year as costs destroy margins and price many out of the market.

[Related: More direct mail news]

Australia Post says the price hikes are necessary because of declining addressed mail volumes, which fell about 4.5 per cent last financial year and 8.5 per cent in the past four months.

Combined with less mail, the company says the number of delivery points grew 120,000 last year to 11.3 million, and are rising an average of 130,000 a year, while the items of mail per delivery point fell to 1.13 a day.

It says since FY2008 yearly mail volumes have fallen by 1 billion, while there are about 1.4 million more delivery points, causing the number of letters delivered to each point per day to fall by more than 31 per cent.

The company saved about $46m last year in cost cutting and hopes to repeat that figure, but losses are touted to soar to $1bn in the near future at current rates.

“We know that price increases are never easy for our customers and we take the decision to implement these cost recovery measures very seriously,” an Australia Post spokeswoman says.

“These price increases will allow us to partially offset the growing losses that we are seeing in our letters business and the increasing operating costs to deliver our other products and services.”

More to follow.

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