Tauranga's postal sector will look entirely different come early 2014 as the changes announced on Friday take place.

Most Tauranga mail sorting will be moved to the Waikato, though some processing will still be done at the Chapel Street mail centre.

Tauranga's mail centre on Chapel Street.

At this stage job losses are not known. NZ Post owned Courier Post will continue operating from the same building meanwhile.

Other Bay of Plenty mail sorting centres centres in Rotorua and Taupo will also be closing, according to NZ Post, with the plan to reduce mail sorting centres to three locations: Auckland, Palmerston North and Christchurch.

Another 500-odd part-time and full-time jobs will be lost as a result, but NZ Post says about 380 new jobs will be created in the expanded sites, so the net job loss is estimated to be 120.

NZ Post Chairman Sir Michael Cullen says the changes are driven by a colossal and on-going drop in postage – by a third since 2006. There has been a 7.5 per cent drop in the last year, 63million less items last year.

Mail volumes are now falling at a faster rate than ever before in the history of NZ Post, and the postal business is rapidly heading into loss-making territory, says Michael.

'Letter volumes continue to decline rapidly due to the greater use of digital channels, email and the significant improvement in accessibility and functionality of portable digital devices such as smart phones,” says Sir Michael.

The Engineering Printing and Manufacturing Union's postal industry organiser Joe Gallagher says the scale of the job cuts have come as a real shock to union members, and he has significant concern for Tauranga posties.

Joe does not know the total number that will be affected in Tauranga, Taupo and Rotorua, but says jobs losses will not only occur in the mail centres, but also in NZ Post's retail network.

'We are still working through what that's going to look like,” says Joe.

'These plans have clearly been in the pipeline for a long time, but the people affected by them, including all New Zealanders who use the postal service, have been kept in the dark.

'Yet again NZ Post and the Government have made a huge announcement out of the blue.”

NZ Post volumes are forecast to drop to below 500 million within five years. Costs have also risen due in part to an increase in the number of locations NZ Post delivers to.

'The financial position of the traditional business has deteriorated to a point where it would be irresponsible not to take action,” says Michael.

'The Board and management are committed to doing this in the best possible way and have developed an extensive package of support for those people who are impacted by the changes.

'This will help provide them with the skills, knowledge and support to assist in their transition to other opportunities.”

He says the reductions will occur in areas, including corporate, processing, retail and delivery.

'While significant, it is important to recognise that the reduction will be phased and will occur over the next three years.

'That impact on people is very regrettable but it's something we can't avoid given the changes to how customers and the broader community are using our services.”

Shedding jobs is driven by a number of factors; the move to less ownership of stores will require fewer NZ Post staff employed in NZ Post's retail network.

Reduced mail volumes means fewer people will be required to process and deliver mail.

Michael says staff and customers will be kept informed as changes are worked through in detail during the coming months.

New Zealand Post Group reported a net profit after tax of $121million for 2012/13. Kiwibank provided the bulk of the profit at $97million, and the courier operation $17million.

The strategy announced on Friday comes on the heels of the Government agreeing last week to change NZ Post's Deed of Understanding to allow reduced mail delivery – three days a week from July 2015 for urban areas, and a five day delivery period for rural.

It also allows NZ Post to rationalise its retail network.

In June this year, NZ Post had 886 postal outlets, consisting of 609 outlets in host businesses providing postal services; and 277 outlets providing a mix of postal and other services, such as bill payment and banking.

Of these 277, 139 are owned and operated by NZ Post while the remaining 138 are operated under agency agreements.

During the next 12 months NZ Post will review a number of the 139 New Zealand Post owned and operated stores to find alternatives to NZ Post owning them.