An overhaul of how Australia Post will operate is on the cards, driven by a decline in letter deliveries as parcel services boom.
The federal government has launched a discussion paper aimed at modernising the postal service and making it more financially sustainable.
Communications Minister Michelle Rowland says it is important Australia Post is sustainable because local post offices remain key service providers in many communities.
"It performs a range of vital community service obligations and especially in rural and regional Australia," she said on Thursday.
"Australia Post not only serves as the post office, often it is the only banking service in town, the news agent, or the retailer, so it is important."
Ms Rowland said while nothing had been decided yet, the changes would be a "productivity driver", with the organisation subject to the same regulation as it was a quarter century ago.
She also backed in postal workers, saying when the last letter was delivered, it would be by Australia Post.
Ms Rowland said the government would not let the postal service fail.
Australia Post CEO Paul Graham said the organisation was entirely self-funded and didn't want to become a financial burden on the government.
"We seek to gain bigger market share, but if we don't address our letter business, that will impact our ability to service the community," he said.
Australia Post delivered more than 500 million parcels during the past financial year, but letter deliveries have been falling rapidly. Australian homes receive just 2.4 letters per week on average and this is expected to halve again in the next five years.
Opposition communications spokesman David Coleman said the government needed to ensure none of the 2500 regional and rural communities that rely on post offices would be disadvantaged by any changes.
Earlier this year, the postal service reported a first-half loss of $189 million and it is set to report its first annual loss since 2015. Despite the talk of modernisation, the discussion paper said Australia Post would remain in public hands.
