In the fortnight to December 3 last year, Budgy Smuggler processed just over 3000 orders with a fuel surcharge of $389. In the same fortnight this year, it processed just under 4000 orders with a fuel surcharge of $2800.

That’s an increase in the charge from about 12.5¢ a delivery to 70¢ within a year.

The brand expects to process about 40,000 orders this summer, meaning it’s up for more than $20,000 in additional fuel surcharge.

“It was just one of those fees you don’t even recognise,” Mr Fewtrell said.

“You just get your Australia Post bill every fortnight, and you see the number and think that’s just what it is. It’s only on the second page you have a breakdown.”

The variability of the monthly surcharge and the brand’s price-point means it’s a difficult cost to palm off to consumers.

Letters a drag

“It’s mostly the margin. It’s one of those things that fluctuates, and you can’t really continuously charge or add 10 per cent. If you’re constantly changing it, people look at the website and think, ‘What’s going on with these guys?’

“It’s one of those things you just get hit with and have to deal with it.”

Delivery management expert Vincent Nair said the surcharge was acting as a headwind for businesses.

Mr Nair, who deals with postage solutions, blames a lack of understanding by policymakers of the correlation between environmental sustainability, fuel consumption, parcel locker optimisation and e-commerce.

“As a benchmark service provider, even Australia Post has been wounded by the lack of competency within federal and state governments and has to resort to increasing its fuel surcharge levy,” he said.

Australia Post’s delivery operations face increasing pressures from its legacy letters operations and the huge shift to e-commerce in recent years, which accelerated during the COVID-19 pandemic.

Modernisation plan

It recorded full-year group revenue of $9 billion, up 8.5 per cent on FY21 and a pre-tax profit of $55.3 million, which was down 45.1 per cent on the previous year. This result included letters losses of $255.7 million.

In its 2022 annual report, Australia Post’s former chairman Lucio Di Bartolomeo said the growth in parcel volumes had “masked the structural challenges in our letters service” which was affecting overall performance.

“In the past three years, domestic parcels revenue has grown 65 per cent, while domestic letters revenue has fallen by more than 17 per cent – now representing less than 20 per cent of trading revenue,” he said.

Sources within the government this week told The Australian Financial Review that it was only a matter of time until Australia Post became a major drain on the public purse without serious reform.

Long-time Lachlan Murdoch lieutenant, Siobhan McKenna, was appointed the new chairman this week and is expected to lead what the CEO describes as an “ambitious plan” to “modernise” the business.

Ms McKenna has been group director of News Corp’s broadcasting arm since 2016 and is chairman of Foxtel, Fox Sports and Sky News.