Why NZ Post is struggling – Kiwibank!

December 7th, 2013 at 7:39 am by David Farrar

Brian Gaynor writes at NZ Herald:

Why does New Zealand Post continue to flounder while Deutsche Post, the German postal provider, has significantly outperformed the Frankfurt sharemarket in recent years and Royal Mail, the UK mail operator, has just had an extremely successful IPO?

A brief assessment of the three post providers shows that the two European companies have clear e-commerce driven parcel and logistics growth strategies whereas New Zealand Post has been adversely affected by the requirement to contribute substantial capital to Kiwibank, its 100 per cent owned subsidiary.

Kiwibank has never paid a dividend, off memory.

Royal Mail’s core operation is the collection, sorting, transportation and delivery of parcels and letters in the United Kingdom. This service operates under a “one price goes anywhere” principle on letters and parcels within the domestic market.

It also owns GLS (General Logistics Systems) which operates a substantial parcel business in 22 European countries.

Royal Mail, like Deutsche Post, has taken advantage of the huge increase in online purchases by individuals and businesses.

That is the future. Not letters.

Royal Mail’s share price closed at 5.96 on Thursday giving IPO participants a capital gain of over 80 per cent and resulting in a sharemarket value of 5.9 billion.

Austrian Post, PostNL in The Netherlands, bpost in Belgium and SingPost in Singapore are also listed on stock exchanges.

Unfortunately the story in New Zealand is far less optimistic even though New Zealand Post reported net earnings, before one-off gains from the sale of assets, of $45.4 million for the June 2013 year. The problem is that the group’s core postal services reported a net loss of $51.5 million for the latest twelve month period (see table).

The focus is on Kiwibank:

No one would argue against the importance of parcels but what investments has NZ Post made in this area? What has it done to capture the e-commerce trade?

For example, parcels were mentioned only thirteen times in the group’s 2011 annual report whereas Kiwibank was referred to 197 times.

One of the problems with NZ Post is that Kiwibank is soaking up most of the group’s surplus cash and seems to be squeezing out the traditional postal services.

A possible solution:

The reality is NZ Post is asset rich but cash poor because Kiwibank, the group’s best performing operation, doesn’t pay a dividend and will require $100 million of additional capital. As a consequence NZ Post does not appear to have invested heavily in its parcel business, which has the best long-term postal growth prospects.

Thus the company has two choices. It can either focus on Kiwibank and let its postal operations decline with more and more branch closures and staff layoffs.

The other alternative is to partially monetise its Kiwibank shareholding by selling a minority stake to the Crown, a trade buyer or through an IPO. This would give NZ Post cash to invest in its parcel business, fund its ongoing commitment to Kiwibank and pay a higher dividend to the Crown.

Sadly, will never happen.

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NZ Post changes

October 24th, 2013 at 12:00 pm by David Farrar

Hamish Rutherford at Stuff reports:

The head of New Zealand Post admits hundreds of postie jobs will be cut after striking a new agreement which could see urban delivery days halved.

Today the state owned enterprise released its new Deed of Understanding, an agreement with the Government which will dictate the minimum standards from mid-2015.

Changes will see urban delivery fall to as little as three days a week, with rural services largely protected, falling only to at least five days a week.

Post is a dying business. I clear my PO Box once a week at best. Anything that is timely gets sent by e-mail or courier.

I understand the more frequent delivery minimum for rural areas is because they do not have good Internet access in many places, so are more reliant on the postal service.

Chief executive Brian Roche said the changes were required by a fundamental decline in the amount of post in New Zealand.

While parcel volumes have climbed since 2006, letter volumes have dropped by around 30 per cent over the same period.

Parcel volumes may be due to Trade Me!

We should have sold NZ Post years ago. It may not be worth very much in 10 years time. Same goes for TVNZ.

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Three days a week

May 3rd, 2013 at 2:00 pm by David Farrar

Vernon Small reports:

NZ Post has warned it is likely to need a subsidy from the Government if it cannot get approval to slash mail deliveries from six to three days a week.

It is also signalling a slow down in Kiwibank’s growth after the Government refused to stump up more capital in the near future to support the state-owned bank.

In a letter to Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall, NZ Post chairman Sir Michael Cullen said the organisation’s social obligations, set out in a Deed of Understanding, were being met despite increasing distribution costs and rapidly falling mail volumes.

If proposed changes to the Deed did not go ahead “we will in all probability need to engage with the Crown to discuss funding mechanisms .. for satisfying the social obligations”, Sir Michael said.

The State Owned Enterprises Act states that if the Government wants an enterprise to provide goods or services to anyone, it must enter into an agreement and in return pay for all or part of the cost – in other words a subsidy.

I’d rather my taxes are spent on schools and hospitals than subsidising postal deliveries.

I only check my letter box around once a week anyway.

I suspect in a generation’s time, kids will ask “What was a post office?”.

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Another capital hungry SOE

March 15th, 2013 at 10:00 am by David Farrar

Jason Krupp at Stuff reports:

NZ Post says its balance sheet will have to wear the $100 million in capital Kiwibank needs to meet its regulatory requirements and replace an ageing banking system.

Testifying before Parliament’s commerce committee today, chairman Sir Michael Cullen said the postal service operator had requested funding from the Government to meet the capital needs of its bank subsidiary, but hadn’t received a definitive answer yet.

The board was operating on the assumption that no further funds would be forthcoming, which is “not surprising in the current situation”, Cullen said.

That meant the state-owned enterprise would have to provide the additional Kiwibank capital, with the lender not yet profitable enough to fund its own capital requirements.

If NZ Post and/or Kiwibank had some private shareholders then they would be able to raise capital without needing taxpayers to borrow money from overseas to fund a competitive risky enterprise.

We should learn the lessons of Solid Energy. Reduce or eliminate the risk to taxpayers.

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NZ Post wants to go three days only

January 29th, 2013 at 12:00 pm by David Farrar

Amy Adams has announced:

Communications and Information Technology Minister Amy Adams has today released a proposal from New Zealand Post seeking to allow greater flexibility in the postal services it provides.

“During the last 10 years mail volumes have dropped considerably, with 265 million fewer items being posted each year compared to 2002. Within five years, mail volumes are forecast to be nearly half what they were in 2002,” Ms Adams says.

“In light of those significant reductions in mail volume, New Zealand Post is seeking to make changes to the Universal Service Obligations it is bound by.

“New Zealand Post has advised me that it considers changes are needed to ensure a sustainable postal service in the 21st century.

The changes sought are here:

The main details are:

  • Going from 5 to 6 day a week delivery to 99.88% of NZ addresses to 3 days a week 99.88% of addresses.
  • Going from 1 to 4 days a week delivery for 0.12% of addresses to 1 day a week for 0.12% of addresses.

I support this change, for two reasons. The first is that NZ Post will simply become unprofitable without them. I don’t want taxpayers subsidising postal deliveries. There are far better things to spend money on.

The other is that for most people, an extra day wait for mail will have no impact. Hell I only clear my letterbox around once a week. Most important communications come electronically or if not practical and time critical by courier. I can’t recall anything I’ve had posted to me that would suffer from a day’s extra wait.

Those in extreme rural areas may find it tough with getting mail once a week only – but that is all that some of them are getting at present anyway.

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Prezoom

October 4th, 2012 at 4:00 pm by David Farrar

Those wanting to order stuff from overseas may be interested in Prezoom. You can order stuff in the UK and US to a local address there, and they then ship it to NZ. Cost is $19.50 for first 1/2 kg and then $4.50 for every 1/2 kg after that.

The NZ Post service is $23.00 for first 1/2 kg and then $10.50 for every 1/2 kg after that.

Hoping some competition will see prices for both firms head down.

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A useful service

September 13th, 2012 at 7:17 am by David Farrar

Stuff reports:

NZ Post has introduced a new service that allows Kiwi shoppers to have purchases from United States online stores delivered to a US address and then to New Zealand.

YouShop enables purchases from American online stores that won’t deliver to New Zealand or that impose high shipping charges.

It mirrors similar services offered by overseas-owned shopping forwarders, such as Prezoom backed by US courier I-Parcel, which launched a service last week to help New Zealanders buy online from US merchants.

YouShop charges NZ$23 to send a 500-gram package from its US address to a customer’s home, while Prezoom charges $19.50, but NZ Post hopes to capitalise on its locally known brand. A message on its website reads: “Know your parcel is in good hands by using New Zealand Post.”

A useful service. I do recall similar ones though. There was a company that provided a US address for people to use for a small fee, and you could choose yourself to package items together and then dispatch them home in one go.

What we really need, is for Kiwibank to provide US credit cards so we can pay for geo-blocked content. So stupid to block your customers from being able to pay for your product.

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A digital post service

July 18th, 2012 at 11:00 am by David Farrar

Stuff reports:

NZ Post will launch a free “digital post service”, YouPost, this year to let people view, manage and pay bills online and receive some mail electronically.

The initiative comes six years after NZ Post pulled the plug on its eBill service which also let people view and pay bills online, because of a lack of uptake. EBill was launched with a fanfare in 1999 and attracted support from 21 utilities and other billers but had only 14,500 users when it closed.

NZ Post’s digital head, Simone Iles, said YouPost was designed to handle mail-outs as well as bills and she believed it would be different this time round.

YouPost would have more bells and whistles, including iPhone and Android app versions, and would better integrate with utilities’ existing systems, she said.

Yet to take a look at this, but having it on smartphones is near essential. The BNZ app for the iPhone is superb. I can log in under ten seconds and pay someone within a minute.

YouPost users will set up an account with a username and password, register their home address and any other properties they are responsible for and list their desired payment methods.

They will then be able to logon to receive, manage, store and pay bills from multiple providers, and to receive digital copies of other mail from utilities in a separate mail box.

Bills will be accessible for up to eight years and a free one gigabyte “electronic vault” will let users backup documents such as legal documents and warranties and set reminders of when things like passports, drivers’ licences, credit cards and vehicle warrants of fitness were due to expire.

Iles said NZ Post later planned to open up the system so small businesses could also use it to send bills and mail to customers.

NZ Post had signed up several major “foundation customers” and was testing the system internally ahead of a pre-Christmas launch.

The service will be free to consumers and paid for by organisations that use it to send bills and mail.

If it is free, I’ll give it a blast!

Good to see NZ Post realising that snail mail is a dying business.

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More on the death of mail

May 14th, 2012 at 10:00 am by David Farrar

This show the projected drop in mail volumes to 2018.

And the drop in fast post volumes.

This reinforces for me why NZ Post’s contractual obligations in the Deed of Understanding have to be removed or at least reduced. If not, then NZ Post simply won’t be profitable – in fact it will need taxpayer injections of funds.

The projections are NZ First Post can remain profitable until 2015, but then it gets hairy unless changes are made, such as requiring six day a week delivery.

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NZ Post

April 25th, 2012 at 2:34 pm by David Farrar

Vernon Small at Stuff reports:

NZ Post has warned 2012 is crunch time, with the state-owned enterprise needing hundreds of millions of dollars in capital for subsidiary Kiwibank as well as flexibility to cut store numbers and halt post delivery on some days.

I’ve always wondered if Kiwibank actually delivers a return on capital greater than the cost of capital. What would be very interesting is an analysis of Kiwibank’s profits since inception, compared to the cost of capital (Treasury bond rates). Ideally such an analysis should exclude profits from the bill payment service they operate, as that was operated by NZ Post before Kiwibank was set up.

A key element would be a review of the Deed of Understanding (DOU), which stipulates NZ Post must maintain six-day-a-week delivery to most of the 1.9 million “delivery points” and operate a network of no less than 880 outlets.

I’m okay with fewer delivery days and fewer stores.

However, mail volumes are in free fall. It had forecast a drop of 5 per cent a year as the long-term trend to electronic mail bit. But in the six months to the end of December 2011 the decline had steepened to 7 per cent; the fastest ever, “which may be the new norm”, Cullen said. “The trend will not reverse and cannot be ignored.”

it is a dying business model.

But while a cut to delivery days is not imminent, the NZ Post board is keen for planning to start. A shift to deliveries every second day could be on the table over the next two to three years. Cullen said the DOU, as it stood, limited the changes that could be made.

Monday, Wednesday, Friday would be fine. If anything is needed the next day you tend to courier it.

So far the NZ Post parent has poured $550m into the bank, but as its own profitability declines that is seen as unsustainable.

Again, an analysis of returns vs cost of capital would be very interesting. If Kiwibank’s profits do not exceed the cost of capital, then the taxpayer us effectively subsidising Kiwibank customers.

“Our preference would be for the Crown to inject capital, providing we are able to satisfy them that they will get a long-term return on that capital, which we believe they will, and that it fits with the Government’s overall economic strategy.”

One source of new capital could be the proceeds from partial asset sales.

That would be ironic. I’d love to see Labour complain about that.

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Ouch

September 23rd, 2010 at 5:58 pm by David Farrar

The Government has announced:

At New Zealand Post, Hon Michael Cullen has been appointed chair from November 1.

Thanks National. Words are inadequate to describe how I feel. The closest sensation it reminds me of is a colonoscopy.

Cullen replaces Jim Bolger, so at least it means there won’t be any change in policy!

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Editorials 10 June 2010

June 10th, 2010 at 12:00 pm by David Farrar

The Herald says NZ Post must not alienate its customers.

What is surprising about the contents of a letter from the NZ Post board to the Government is the extreme nature of one of the options under consideration. That would see mail delivered every second day.

If enacted, this would be the equivalent of NZ Post shooting itself in the foot. In effect, the organisation would be conceding that postal delivery has become something of an irrelevance.

Advocates of such a move would say that is already largely the case. Over the past year or two, letter volumes have been declining by about 6 to 7 per cent annually, an unprecedented rate far in excess of the 1 per cent or so drop of previous years.

Almost all my mail now is junk. 80% of my suppliers now e-mail me statements etc.

That trend is almost certain to continue as more consumers embrace online communications and bill payments. But delivering mail every second day would surely serve only to accelerate the rate of decline.

Yes, but it would accelerate a decline in costs.

Of these, the ending of Saturday deliveries appeals as a reasonable first step towards cutting costs that would have little impact.

Australia and Britain long ago abandoned weekend deliveries, and the United States is about to do the same. It is remarkable that it has remained part of NZ Post’s contract with the Government for so long.

Indeed, it says much about the organisation’s service ethos. But relatively little mail is delivered on Saturdays, and the service would hardly be missed, even by old people, who rely more on mail than other groups.

A sensible first step.

The Press wants more cruise liners to Christchurch:

The idea of building a swept-up dedicated facility at the Lyttelton port to serve cruise liners is an attractive one.

In addition to the fact that the Lyttelton Port Company says that as its other shipping activities grow it has an urgent need for one anyway, a new, modern facility providing a good first impression for visitors to Christchurch and the wider region is certainly worth serious consideration. The port company has so far, however, not been able to persuade others who would have to put some money up to pay for it that the proposal is financially worth-while. Since they are the ones who would most benefit from the project, it suggests that some of the claims made for it may not stand up under closer scrutiny, at least not in the present financial climate. …

If a compelling economic case can be made that a better facility will increase the volume of traffic at the port above what would occur in any event, then the port company will deserve to win financial support for it. But money should not be put into it simply because it would make an attractive building on the waterfront.

The Dom Post says Peter Bethune is fighting the right fight but with the wrong tactics. I agree. The Dom Post incidentally has been a strong campaigner itself against Japanese whaling:

Supporters of New Zealander Peter Bethune, facing a Tokyo court after boarding a ship protecting Japanese whalers in Antarctic waters, are right to describe as bizarre Sea Shepherd’s decision to ban him from future protests because of his bow andarrows.

Taken at face value, it is a late development of responsibility from an organisation that has a well-deserved reputation for protests that cross the line into idiocy and endanger lives.

Its founder, Paul Watson, threatened in an earlier protest to ram his ship into the slipway of a Japanese whaler, saying he would give it “a steel enema”.

He has been reported as referring to Greenpeace as “Yellowpeace” over its refusal to use violence. In a 2007 interview with the New Yorker magazine, he said Sea Shepherd had sunk – in port – 10 ships. (The magazine credited Sea Shepherd with two sinkings and two attempts.)

That sits oddly with Sea Shepherd’s now announced stance of “aggressive but non-violent direct action”.

Indeed. It may be a publicity stunt to try and get a lesser sentence for Bethune.

Another is that, however much Bethune might wish otherwise, the case does not revolve around Japan’s shameful use of the scientific whaling loophole to pursue what amounts to a commercial operation in the Southern Ocean, but around charges of trespassing, vandalism, possession of a knife, obstructing business and assault – charges on which he appears to have received a fair trial.

Bethune chose foolish tactics to promote his views. The Japanese were entitled to use the law to test whether he went too far. He and his family must now be concerned that he will pay a high price for his high principles.

The four charges he pleaded guilty to were fairly minor, and if he is found innocent of assault, I hope he gets to come home soon. If he is convicted on the acid throwing charge, he may be in Japan for a fair while longer.

The ODT notes the retirement of Pete Hodgson:

Mr Hodgson was no novice when he sought public office. He had become the Labour Party’s master election strategist at a time when such essential duties were still of an amateur nature.

He became aligned with Helen Clark’s backers and by the time she achieved the prime ministership, in 1999, he had become a member of her trusted inner circle along with Michael Cullen, Trevor Mallard, Phil Goff and Steve Maharey.

She appointed him a minister from a caucus light on genuine talent and gave him a heavy workload from the start, reinforced by his task in Parliament’s debating chamber as one half of Labour’s heavy artillery in debates – the other half being another Dunedin MP, Michael Cullen.

As a minister, Mr Hodgson’s success was mixed. His generally detached demeanour – that of a strategist and pragmatic thinker – provided no profile with which the public could warm to, and Ms Clark gave him some most unpopular portfolios including climate change, energy and health.

In politics, nothing lasts, and it became clear Mr Hodgson’s star was losing its shine in 2008, when he was replaced as the party’s chief strategist for the forthcoming election by Helen Clark herself.

Mr Hodgson has generally been considered a well-liked and hard-working constituency MP who wore his political colours lightly when it came to representing Dunedin’s interests and the personal matters with which, as Dunedin North MP, he dealt on a daily basis.

Even in this professional political era, Labour will miss his strengths – and Dunedin will certainly miss his abilities and advocacy.

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Postal deliveries

June 9th, 2010 at 11:00 am by David Farrar

The Dom Post reports:

Saturday postal deliveries may be axed or posties may call only every second day as NZ Post looks to keep its mail business profitable in the face of people switching to email.

In a letter to State Owned Enterprises Minister Simon Power, obtained under the Official Information Act, chairman Jim Bolger said the NZ Post board was looking at several options, including “reducing the number of days that mail is delivered”.

Mr Bolger said yesterday that deliveries every second day were an option. “Personally I don’t think you could rule that out”, but that was not a NZ Post position. “There is only one message – mail volumes are going down worldwide. Digital technology is replacing hard copy.”

However, a spokeswoman for Communications Minister Steven Joyce, who must approve a change in delivery days, said no option had yet been presented to him. “He would take a lot of convincing.”

I think canning Saturday deliveries is a no brainer, and even going to deliveries on Monday, Wednesday and Friday only is worth considering. I really doubt there are many people who need to get their mail every day.

Most houses did not receive a piece of mail every day and some got only one letter a week.

Would be interesting to see exact stats on that, but they sound right to me.

Postal Workers Union advocate Graeme Clarke said an end to Saturday deliveries would be popular among the 1200 posties he represented – provided they were paid the same.

What world does Mr Clarke live in? Why on earth would anyone expect to continue to be paid to work six days a week, when in fact they only work five?

Engineering, Printing and Manufacturing secretary Andrew Little, representing 4500 NZ Post workers including 2000 posties, was not opposed to five-day-a-week deliveries in principle. Deliveries every second day would be another matter.

Good to see Andrew not entirely opposed. I think deliveries three times a week is also worth looking at – it could significantly reduce the cost of postage. Remember the purpose of having a postal system is not to create jobs, but to provide an efficient and effective communication service.

Issues of bag weights and pay would need to be discussed.

If bags are heavier, then could be fair enough to look at an increase in hourly rates to compensate. However that is very different to Mr Clarke just saying we should be paid the same for working one day a week less.

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Finally official

May 12th, 2009 at 9:13 am by David Farrar

NZ Post has just announced:

New Zealand Post Chairman Rt Hon Jim Bolger today announced that the Group’s Chief Executive John Allen will leave at the end of June to take up the appointment of Chief Executive and Secretary of Foreign Affairs and Trade.

His tenure at MFAT will be much watched!

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Glender Fryer campaigning

April 28th, 2009 at 1:39 pm by David Farrar

Labour aspiring candidate for Mt Albert Glenda Fryer put out a release yesterday:

After receiving news that francisee Chander Satija was to have the Sandringham Post Office and Kiwibank closed down, Cr Fryer wrote a letter to NZ Post and met with Auckland representatives to ask them to reconsider their decision.  NZ Post undertook to do this.  NZ Post have yet to give Mr Satija their final decision. …

Concludes Councillor Fryer “ I know the franchaisee Chander Satija   has given NZ Post over 500 letters from local people saying how much they depend on the services of the post office and bank.  Many locals feel they also want to show their faces and stand behind the only bank in Sandringham to tell NZ Post they love their local services and don’t want them closed down. “

So that evil NZ Post is closing down the Sandringham Post Office and Kiwibank. Maybe Glenda should lobby some of the Directors. Perhaps a Mr Shale Chambers? It should be fairly easy for her to lobby him, as he is her husband.

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Kids Voting 2008

November 27th, 2008 at 9:29 am by David Farrar

Local Government NZ, along with NZ Post, ran a simulated election amongst secondary school students alongside the general election. This is a great civics initiative and 13,000 voted.

And those who want a smaller Parliament will be delighted with the results – a Parliament of only 107 MPs!

How is this possible? It is an obscure feature called underhang – the opposite of overhang. Let us look at the results:

  1. National 28.4%, 36 seats, 29 elects, 7 list
  2. Labour 25.0%, 32 seats, 16 elects, 16 list
  3. Bill and Ben Party 11.7%, 15 seats, 0 elects, 15 list
  4. Greens 11.2%, 14 seats, 0 elects, 14 list
  5. Legalise Cannabis 10.5%, 13 seats, 0 elects, 13 list
  6. Maori Party 4.9%, 6 seats, 6 elects, 0 list
  7. ACT 1.9%, 2 seats, 1 elect, 1 list
  8. NZF 1.0%, 1 seat, 1 elect, 0 list
  9. United Future 0.7%, 1 seat, 1 elect, 0 list

Now the Bill and Ben Party only had two candidates (Bill and Ben!) on their party list, so there would be an underhang of 13 MPs for a Parliament of 107. This means to form a Government you need 54 votes. So what would the Government be?

You could do National 36 + ALCP 13 + Maori 6 = 55

More likely is Labour 32 + Greens 14 + ALCP 13 = 59

The electorate seat won by NZ First was actually in Tamaki, so their sole MP would be a Doug Nabbs.

They have given results for each electorate also. Below are the seats where a different party would have won the electorate vote if the kids were the real electors:

  1. Auckland Central – Labour
  2. Bay of Plenty – Labour
  3. Dunedin North – National
  4. Invercargill – Labour
  5. New Lynn – National
  6. Rimutaka – National
  7. Tamaki – NZ First
  8. West Coast-Tasman – Labour
  9. Whanganui – Labour
  10. Wigram – National
  11. Ikaroa-Rawhiti – Maori

It is great to see the kids encouraged to take part in mock elections and vote. The results do show though why the Greens are bonkers with their campaign to lower the voting age to include 16 and 17 year old schoold students.

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