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Our businessChairman’s messageto collect their parcels at a time that was convenient for them.We also opened 23 Business Hubs to provide dedicatedcustomer service and distribution support to small- andmedium-sized businesses in their local area.Another highlight of this year was the March announcementof our Digital MailBox – a secure, online digital mail servicethat will be free for all Australians. By launching this newservice, we are embracing our customers’ preference for digitalcommunications and offering them a secure portal throughwhich to receive and manage all of their personal informationonline. When our Digital MailBox is launched in 2012, ourcombined physical and digital mail offering will be unique.Future-proofing our businessAll around the world digital communications technologyis changing the way that people communicate, shopand do business. This shift in customer behaviour ishaving a marked impact on a range of industries – andit’s particularly noticeable in the postal, distribution,logistics and retail sectors, which are all undergoingmajor structural change.At Australia Post, the impact of digital substitution on ourtraditional core business reached a tipping point in 2008–09,when the combination of the global financial crisis andelectronic substitution contributed to the first significantyear-on-year decline in the volume of mail posted byAustralians (up until 2000, our letter volumes had grown – orcontracted – in tandem with GDP). Unfortunately, Australianmail volumes have not recovered since – and this year ourtotal addressed mail volumes were 17 per cent lower thanthe mail peak of 2007–08. While the Internet and digitalcommunications are causing the steady erosion of our mailvolumes, we are also realising benefits from the emergingdigital economy – and there is clear potential for future growth.Just one example is the surge in parcel volumes that we haveenjoyed over the past two years as a growing number ofAustralians do their shopping online.In response to these market trends, we launched ourbusiness renewal program, Future Ready, in April 2010.In essence, Future Ready is about re-engineering AustraliaPost to be an enabler of the digital economy. It is underpinnedby a significant investment in building new digital capabilitiesand services and a relentless focus on the needs of ourcustomers. We now have three Future Ready strategic goals.We aim to: build a sustainable communications business – bothphysically and digitally build a world-class parcels business – with excellencein service performance build a multi-channel trusted services offer for consumers.A year of progress and achievementThis year we made important progress with strategicexecution by launching a range of new business initiativesthat will contribute to our business for many years to come.The opening of our flagship superstore at the Brisbane GPOin November 2011 was a landmark event – and we have sinceopened superstores in Cairns and Melbourne, with many moreto come. We successfully trialled 24/7 parcel lockers at threesites initially, and our customers clearly relished the opportunity8During this “rebuild” phase of Future Ready, the focus of theBoard of Directors has been on the capital investment requiredto meet our strategic objectives over the next three years,including the development and rollout of our new services.These are all important investments that are designed toprovide greater convenience and choice for our customers.Another big challenge for our business over the coming yearswill be the reconfiguration of our mail and parcel networks sothat we are equipped to efficiently handle the growing volumeof larger items, as Australian e-commerce takes off.Building a sustainable businessAt Australia Post, sustaining our assets, our operations andour services for the benefit of the Australian community isat the very core of what we do. We have again returned agood profit this year and our people, across all levels of thebusiness, are taking responsibility for actively managing ourbroader social impacts. We made some good progress withsafety (our incident rate was down by 21 per cent this year)but there is still much to do. We are also on track to meetour 25 per cent carbon reduction target by 2020, with ouremissions down by 14,026 tonnes this year.Thank youI have had the enormous privilege of serving on the AustraliaPost board, in the role of deputy chairman and chairman,for the past 11 years. This annual report marks my last asa director with my second term as chairman expiring on11 September this year. I believe we have made real progressover these years. The corporation is well placed to respondto the continuing challenges it faces as a rapidly growingbusiness in a fiercely competitive marketplace. I would liketo sincerely thank the many wonderful people I’ve met overthe years. I especially want to acknowledge Graeme John,Ahmed Fahour, my fellow directors and the executive teamwho have led Australia Post with passion, ambition and agenuine sense of community service. Finally, I want toacknowledge the nationwide team of 40,000-plus staff,licensees, franchisees and contractors who deliver essentialservices and keep Australia connected day in and day out.It has been an absolute pleasure to work with them.David A Mortimer AOChairman

Managing Director andCEO’s messageHelping small- and medium-sized Australian businessesto transact online (e-commerce) is an important part of ourparcels growth strategy. This year, we opened 23 BusinessHubs where we have co-located our transport and deliveryoperations and sales expertise to provide dedicated supportto our business customers in their local community.We continue to see declining customer visitations to our retailoutlets, as Australians send fewer letters and move to onlinebill payment and banking. However, we are continually findingnew ways to attract people to our stores by adding new,relevant and valued services. Prime examples of this in2011–12 were the introduction of the popular Load&Goreloadable Visa Prepaid card and in-store distributionpartnerships with American Express and Rural Bank.I’m proud to report that Australia Post has againachieved its important milestones this year for itscommunity service and commercial obligations.Balancing community service and commercial returnsOur business is unique in that it has a “dual purpose”:(1) we provide a very important community service to allAustralians, and (2) we run a competitive business that mustdeliver a commercial rate of return. I am very proud that,despite the difficult business environment and the structuraldecline in our traditional letters business, we have againachieved these objectives this year.We honoured our community service obligations, suchas delivering 95.6 per cent of domestic letters on time orearly (our target is 94 per cent) and increasing the numberof retail outlets that service metropolitan, regional and remotecommunities to 4,428 stores (up nine from last year).We also had a solid year commercially, with trading revenueup 2.8 per cent (to 5.1 billion) and our profit after taxincreasing by 16.6 per cent to 281.2 million. While this result ispleasing, the ongoing decline in domestic letter volumes (down4.4 per cent this year) continued to put significant pressure onthe corporation. The two-speed nature of our business wasagain evident this year with our regulated business returningan operating loss of 148.1 million, while our non-regulatedbusiness returned a strong operating result of 545.6 millionwith parcels and retail services both performing well. Overall,we achieved a satisfactory return on equity of 18.7 per cent(up from 13.4 per cent last year).Digitising our businessAustralia Post is uniquely positioned to enable connectionsbetween the physical and digital worlds, and we aretransforming our communications, parcels and retail businessesto deliver this. We are planning 1.6 billion of capital investmentover the next four years to ensure we remain relevant in a digitalworld and meet changing customer preferences, whilemaintaining our world-class mail service.With the continued decline in mail volumes, the greatestopportunity to make our communications businesssustainable is to add digital alternatives to our formidablephysical offerings for our customers. This year we announcedthe Australia Post Digital MailBox, which will be offered as afree service to all Australian consumers in 2012.We want to offer Australians more choice in how they interactwith our business, and we are delivering on this promise acrossall our customer touch points. Some examples this year includethe launch of our retail superstores with 24/7 zones whichfeature parcel lockers, self-service terminals for paying billsand lodging parcels and vending machines for purchasingpostage products.A safe and engaged workforceI am very proud that this year we have improved ouremployee engagement levels, with an engagement scoreof 73.4 per cent (up 4.6 per cent on last year). Safety remainsa priority and we continued to invest in programs to raiseawareness and change behaviour. While we have beensuccessful in lowering the number of workplace incidents, westill have a way to go to reduce the severity of those injuries.We will continue to focus on these important areas as westrive to embed a world-class safety culture, maintain anengaged workforce and achieve our sustainability targets.Looking forwardAustralia Post is a nationwide, community-based brand.Our role will continue to be to provide essential services thatconnect Australian businesses, government agencies andconsumers. However, our business continues to face greatchallenges. As a self-funding business, Australia Post returnsmost of its profit as a dividend to our shareholder, theAustralian Government. The rest of our profit is reinvested in ourbusiness for the benefit of our customers and the community.Over the coming year we move into the next phase ofFuture Ready, which involves growing our business so thatwe remain viable and can continue to fulfil our communityservice promise.On behalf of the board a

Post positively for customer service this year, with 77* per cent rating us 7 out of 10 or higher. (*Average score across consumer and business customer segments.) #1 fresh business idea In December 2011, BRW magazine listed our 24/7 parcel lockers the “freshest business idea” for 2