State-owned company transitioning to logistics service, English says, as 500 jobs cut.

New Zealand Post will stay Government-owned, says Finance Minister Bill English, after news it is axing up to 500 jobs over three months.

The planned cuts, announced yesterday, form part of the 1500 to 2000 job losses NZ Post signalled at the end of 2013.

"New Zealand Post can confirm it is about to enter a period of consultation with, predominantly, managers and specialists at head office and in support roles. The roles are mainly in Wellington, Auckland and Christchurch," a spokesman said yesterday.

Commenting on the news, English said NZ Post was adjusting to the reality of falling letter volumes and "working out how to become a bit more of a logistics company".

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Asked by reporters if the Government wanted to own a logistics company, English said: "It's Government-owned, we're going to be keeping it, so they'll have to find a solution."

English said NZ Post and its subsidiary Kiwibank were working out the best long-term arrangement.

Queried over whether the two state-owned entities could be split up, English said there was already a "degree of separation" between them.

He said there had been discussions over whether NZ Post was subsidising Kiwibank.

"Certainly through the start-up phase it has been but NZ Post can't afford to keep cross-subsidising the bank," he said.

NZ Post said yesterday that its proposal over the 500 job losses and other changes "have been widely signalled".

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"The process is part of our ongoing change as we redefine ourselves for the future - in response to an annual $20 million to $30 million fall in revenue as people send 60 million fewer letters every year.

"New Zealand Post will continue to deliver mail but increasingly the future is in the parcels space, as online shopping continues to grow."

However, the union representing some of the 500 workers losing their jobs says it got no notice of the cuts but expects there will be more to come as the state-owned postal service scales back on traditional mail.

Joe Gallagher, the industry organiser for postal workers at E tu, said he got no formal notification that the job cuts would be announced.

"I was aware, but only through individuals talking to me," Gallagher said.

"I had to ring some pretty high-level people in New Zealand Post this morning and say, 'What the hell?' They seem to forget a lot of people retain union membership. It doesn't surprise me, but it has been a bit of a shock today."

NZ Post reported profit of $110 million in the six months ended December 31, from $100 million a year earlier.

Stripping out the gain from asset sales, earnings fell 14 per cent to $74 million on an 8.8 per cent drop in revenue to $766 million.

The state-owned enterprise pared back its traditional letter-delivery service last year and moved to alternate day delivery for standard letters in urban areas. At the same time, the group has targeted earnings growth from Kiwibank, established 14 years ago.

- Additional reporting: BusinessDesk