Australia Post's requirement to provide daily letter delivery services will be reduced to every second day, as the corporation seeks to stem losses from the service.

New delivery standards to be set by the government will still require parcels and priority mail to be delivered every day, but with letter demand decreasing Australia Post has argued daily letter delivery has become unsustainable.

Australia Post is entirely government-owned but also entirely self-funded, and currently works under strict obligations to provide near-universal letter deliveries to Australian homes five days a week and operate post offices close to homes.

But it says the average Australian household now receives just two addressed letters each week, and the rules have become burdensome.

The business posted a $200 million loss last financial year, its first year recording a loss since 2015, with growing losses forecast in the years to come.

Meanwhile, its parcels business continues to grow.

Australia Post CEO Paul Graham said the changes would free up posties to focus on parcel delivery.

"The changes to the frequency of letter delivery will enable us to focus on what matters most to Australians — fast and reliable parcel delivery with better tracking technology and quicker turnaround times for eCommerce," Mr Graham said.

Australia Post says trials of the new regime brought a significant increase in productivity that allowed for 20 per cent more parcels to be delivered.

Under the new delivery rules postal workers will still deliver within their round each business day, with one postie allocated to one round, rather than having to cover several rounds as was done under previous delivery models.

Posties will deliver parcels, express and priority mail to all properties in their round each day, but only deliver letters to half of their round each day.

Australia Post's time frames to deliver regular letters will be extended by an additional business day.

The modernisation plan will also add more parcel posting and collection locations that are open at more "convenient" times, such as parcel lockers.

 

Trials of the new delivery system found posties were able to deliver 20 per cent more parcels.(Supplied: Australia Post)

Communications Minister Michelle Rowland said that model will help to support the jobs of postal workers, while making letter delivery more efficient.

"Australia Post can't stand still. Consumer and small business demands are changing, and Australia Post also needs to adapt," Ms Rowland said.

"These new processes will mean Australia Post continues to deliver the high-quality letter service many Australians rely on, while also growing its booming parcel business for the benefit of consumers, small businesses and its hardworking staff."

The union representing postal workers said the changes were "good news all around".

"It allows more product to be delivered in the time available, eliminates local backlogs and has created a smarter and safer way to work – reducing fatigue amongst our posties," Communication Workers Union president Shane Murphy said.

"The feedback from those trialling the new model has been overwhelmingly positive."

Separately, the government will develop a mechanism to oversee Australia Post's pricing for postage, which it says will give customers more certainty on prices.

The Australian Competition and Consumer Commission is currently assessing Australia Post's plan to increase the basic postage rate from $1.20 to $1.50 early next year.