Australia Post will reduce letter deliveries to every second day in metropolitan areas under a major overhaul during the COVID-19 crisis as chief executive Christine Holgate warns the postal service is responding to a decade's worth of transformation in the space of a month.

While the collapse in business activity across the country has slashed letter volumes, which may never recover, the crisis has fuelled "phenomenal" growth in parcel delivery. Ms Holgate said the relaxation of long-standing standards on delivery times and frequency, announced on Tuesday, amounted to the biggest shift for the government-owned business in two decades.

Australia Post CEO Christine Holgate says the disruption to operations from COVID-19 has been significant. Credit:Peter Rae

The government's changes will allow Australia Post to cut delivery frequency in metropolitan areas from daily to every second day, extend the required delivery time for intrastate letters to five days and remove the priority mail letter product.

Communications Minister Paul Fletcher said the new standards, to be reviewed in June 2021, would give Australia Post the "flexibility to respond to the increased demand for parcels, which will help posties continue to deliver essential products and services to Australians".