A lost love for letters means posties will cut back deliveries to most households to every second day, although parcels will still be dropped off daily.

After recording a $200 million loss, Australia Post is shifting its priorities to packages, with half a billion parcels delivered to people in the last financial year.

Postal workers were able to deliver 20 per cent more parcels during a trial of the skipped letter rounds.

Under changes announced on Wednesday, an extra delivery day will be added for letter deliveries to make up for the change. Priority mail delivery – which makes up 8 per cent of addressed letters – will also be revamped so they are delivered faster.

One postie will remain allocated to one round rather than needing to cover several routes, which is currently the case.

Australians receive an average of two addressed letters a week.

Communications Minister Michelle Rowland said Australia Post needed to adapt to the changing digital environment.

“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,” she said.

“Modernising Australia Post will put it on a surer footing so it can deliver the essential community services Australians need.”

Letters were blamed for Australia Post’s eye-watering loss – only its second since 1989 – announced earlier this year. The government-owned enterprise’s losses on letters were up more than 50 per cent to $384 million in the past financial year.

It was enough to drag down the performance of the flagship parcels business, which had sales rise to $7.3 billion amid ongoing investments in faster deliveries across major capital cities.

Finance Minister Katy Gallagher said the organisation needed to save money so it didn’t go bust.

“The fiscal sustainability of Australia Post is vital to the government’s ongoing commitment to provide high-quality postal services to Australians,” she said.

Australia Post had pushed strongly for the letter delivery change. In August, Paul Alexander, an associate professor at Curtin University, said Australia Post was “lobbying like crazy” for changes to its letter business – particularly reductions in delivery frequency and raising prices.

“To run at a loss because it’s a social service is a false economy,” he said.

“You get unprofitable services being supported by profitable ones.”

Australia Post’s proposal to jack up the price of stamps for standard letters from $1.20 to $1.50 from early next year is being reviewed by the consumer watchdog.

Prices for concession card holders will remain at 60 cents and Christmas stamps will still be able to be picked up for 65 cents.

-with AAP