NZ Post has secured agreement from the Government allowing it to move to three day a week letter deliveries from 2015 but rural areas will still retain their current services.
Communications Minister Amy Adams confirmed the Government had reached agreement with NZ Post on changes to the mail service's Deed of Understanding, "to ensure the postal service remains viable".
NZ Post has been signalling the need to make changes to its delivery services in the face of plummeting letter volumes. But suggestions of moving to three day a week deliveries raised alarm bells among rural communities.
"Through negotiations, I have secured agreement from New Zealand Post that it will limit any introduction of a minimum three-day delivery to only urban areas, maintaining five-day delivery in rural delivery areas", Ms Adams said in a statement.
"It is important to note that three-day delivery is the minimum standard New Zealand Post must meet.
This means that New Zealand Post may continue to provide a higher frequency of delivery in some non-rural areas."
The minimum standards in the deed will only apply to basic or standard postal services and not other types of postal products or services such as express mail, courier post, parcel post or premium services such as Fast Post.
Changes to the Deed would also require New Zealand Post to continue to maintain a retail network of at least 880 "points of presence" but allows for some of those to be self-service kiosks as well as physical postal outlets.
NZ Post had agreed to maintain at least 240 outlets where customers could receive personal assistance from an employee or agent of New Zealand Post.
"This will give comfort to members of the public who may feel anxious at the prospect of the introduction of self-service kiosks," Ms Adams said.
The timeframe for implementing the changes to the deed were a commercial decision for NZ Post after 30 June, 2015.
NZ Post chief executive Brian Roche said the new deed gave the company the flexibility it needed to continue providing New Zealanders with a postal service "that meets their changing requirements and expectations".
"The flexibility means while New Zealand Post is committed to providing an across the week premium mail service we have room to move in the years ahead on the frequency of standard letter delivery."
He said the change in delivery frequency was inevitable given the ongoing and rapid decline in letter mail volumes.
While parcel volumes had increased by nearly 3 million since 2006, over the same period letter volumes dropped by 322 million - or 30 per cent.
"The changes also recognise that technology such as self-service kiosks will form a significant part of our postal service point network, and a move towards a franchise and hosted business model."
Ms Adams said current minimum service levels for rural areas would be maintained because "the reality is that in the in the rural and urban areas the dynamics are different and it's much harder to maintain a viable postal business on a three day a week basis than in the rural areas''.
"Similarly of course we have to take into account the impact on those communities and there can be no doubt that rural communities are more reliant on postal services than perhaps some of their urban neighbours.''
Ms Adams said almost 90 per cent of submissions received on the proposed changes related to the rural services.
She said NZ Post had told the Government that without the move to three day a week deliveries, "they would be looking to the Government for subsidies that could well be in the range of $30 million a year or more''.
"As mail volumes continue to decline I'd imagine that number would continue to increase.''
She said it was "an inescapable fact'' that around the world mail volumes were dropping.
"Of course when you have a small population spread across a big country it perhaps hits the critical point sooner in New Zealand than in other places.''
The Engineering, Printing and Manufacturing Union (EPMU) which represents some postal workers said the changes announced today ``herald massive cuts to postal services''.
EPMU postal industry organiser Joe Gallagher said the union was "incredibly disappointed with this decision, and how it has been made''.
"New Zealand Post is a vital public service which returned a profit of $121 million in 2013. It should be focused on delivering for Kiwis, not cutting essential services to turn bigger profits.
"We have not had any answer to our questions about the figures this decision is based on, and we have to ask why the Government has decided to let urban services be cut in half while the rural sector is kept to five days a week.''
Ms Adams confirmed that the move will cost jobs but said it was for NZ Post to comment on how many losses might occur as a result.
Federated Farmers said it was thrilled rural deliveries would continue five days a week.
"This is great news for rural people, as many businesses are still heavily reliant on a five day service,'' Federated Farmers' national president Bruce Wills said.
"Whilst technology is changing the way we communicate and eventually we will see a decline in postal deliveries, we are not there yet.
"There are still some 86,000 rural people off-line, where rural post is a daily fixture in the running of their business and household,'' he said.