One of Australia's oldest companies, Australian Post is expected to lose billions of dollars over the next decade due mostly to its failing letters business. Its 32,000 employees are expected to be told of the job cuts on Tuesday, with 70 per cent of the jobs to go in Melbourne, where the head office is located. Another likely casualty of the crisis is every-weekday home delivery of standard-priced mail. If Australia Post wins approval to change government regulations, standard mail will be delivered only two or three days a week instead of five.

The Sunday Age has been told that private modelling has estimated Australia Post will lose $7.1 billion through to 2022-23 if the business continues on its current path. Losses in the letters delivery business alone are forecast to be $12 billion over the same period.

Such grim forecasts convinced Abbott government ministers that they should not sell Australia Post, which was founded in 1809.

The 900 job cuts are expected to save the company about $90 million a year in salaries. The redundancies are believed to be in ''non-customer-facing'' jobs, including management, supervisory, administrative and IT staff.

Apart from Melbourne, about 15 per cent of cuts will be in Sydney. A smaller number of jobs will disappear in Brisbane and other cities.

Australia Post executives have long been lobbying the federal government to reduce its five-day mail service to three days. A three-day-a-week delivery requires federal government approval as Australia Post is obligated by regulation to deliver letters five days a week to 98 per cent of homes and businesses across Australia.

The job cuts - which follow a freeze on external recruitment imposed last year - will be sold to Australia Post staff and the public as being necessary to pay for the many ''innovations'' already announced by the company. These include introducing Saturday parcel deliveries, Saturday Express

Post services and extended weekend trading hours.

Australia Post chief executive Ahmed Fahour had been warning colleagues and the government of the company's impending financial crisis unless urgent action was taken. Mr Fahour, who has been chief executive since 2010 and was paid $4.8 million last year, said in a speech last month: ''The unfortunate reality is that our regulated letters business is now bleeding money - as the community shifts away from letters and towards digital forms of communication.

''If we wait another 12 months, it might be too late as the large losses from the letters will overwhelm the organisation.''

He added, ominously: ''There is less business, so it's harder to feed so many mouths.''

Australia Post's most urgent problem is that while the population is growing and people are building more homes and apartments - thereby increasing the geographic spread and cost of deliveries - Australians are also sending far fewer letters.

About 1 billion fewer letters have been sent over the past five years, which has led to mounting losses in the regulated letters business. In financial year 2010-11, the letters business lost $122 million, which grew to a loss of $187 million the following year and $218 million last year.

Australia Post has consistently returned dividends to government since corporatisation in 1989. Last financial year's dividend was $142 million, but the Abbott government's May budget forecast dividends would shrink to zero within a few years.

In his speech, Mr Fahour said he wanted to avoid the enormous job losses seen in letters businesses around the world, including at the US Postmaster General. ''Without change and reform, Australia Post will not be able to survive,'' he said.

Spokesmen for Australia Post and Communications Minister Malcolm Turnbull declined to comment.