Inflation rate triggers one-cent domestic rate increase in 2007
June 28, 2006
Under the price-cap formula approved by the federal government in 2000, basic letter rate increases, when warranted, will not exceed 66.67 per cent of inflation as measured by the Consumer Price Index from May prior to the last increase to May of the current year. Increases will be implemented no more than once a year, in January, and announced six months in advance in the Canada Gazette Part I.
The Consumer Price Index from May 2005 to May 2006 shows an increase of 2.8 per cent. Under the price-cap formula, 66.67 per cent of the CPI increase plus the unused portion related to the January 2006 increase, permits a one-cent increase in the basic letter rate. Even at the new rate of 52 cents, Canadians will still enjoy one of the lowest domestic basic letter rates among industrialized nations.
Canada Post announced in the Canada Gazette Part 1 the following proposed rate adjustments that will come into effect January 15, 2007.
- $0.04 increase to $0.93 for letters, cards and postcards up to 30g destined for the USA;
- $0.06 increase to $1.55 for letters, cards and postcards up to 30g to foreign destinations.
Rate increases are necessary to keep pace with inflation, direct operating costs and the need to reinvest in network infrastructure to meet customer demands. Fuel costs, for example, have risen 18 per cent since 2005 with a further increase of 5 per cent expected in 2007.
Another source of increased cost is terminal dues, a pricing mechanism that allows the postal administration receiving mail for delivery to collect for the cost of delivery from the postal administration sending the mail (in this case Canada Post). It is expected that terminal dues to the United States will increase by a minimum of 3 per cent in 2006, while dues to other international destinations will increase between 5 per cent and 8 per cent.
Detailed information on these and other proposed rate changes is available in the Canada Gazette Part 1. Canadians have 60 days in which to make representations to the Minister Responsible for Canada Post regarding the proposed rate increases.