The head of New Zealand Post admits hundreds of postie jobs will be cut after striking a new agreement which could see urban delivery days halved.

Today the state owned enterprise released its new Deed of Understanding, an agreement with the Government which will dictate the minimum standards from mid-2015.

Changes will see urban delivery fall to as little as three days a week, with rural services largely protected, falling only to at least five days a week.

Meanwhile there will also be a substantial increase in the number of self-service kiosks, likely to mean the closure of post shops where customers deal with human staff.

The cuts are designed to keep NZ Post financially viable, after the company warned that without changes, it could require a subsidy of up to $30 million a year from the Government.

Chief executive Brian Roche said the changes were required by a fundamental decline in the amount of post in New Zealand.

While parcel volumes have climbed since 2006, letter volumes have dropped by around 30 per cent over the same period.

"It's no secret that there is less volume going through the network," Roche said in the company's headquarters in Wellington today.

The current deed was agreed to in the 1990s and "we needed a deed that set a framework for the new century".

Roche would not comment on the amount the money would save, but said it would mean NZ Post would not require a subsidy in the medium term.

He would not say how many jobs would be lost as a result of the plans ahead of talks with unions.

"We're not going to try and fudge it though, these will be significant."

Roche later admitted it would be "hundreds" from a postie workforce of around 2000 people at the moment.

"The really sad bit about this [is that] it's not about their performance."

The Engineering, Printing and Manufacturing Unions said it was shocked by the announcement.

"These changes herald massive cuts to postal services," Joe Gallagher, the EPMU's postal industry organiser said in a statement. "We are incredibly disappointed with this decision, and how it has been made."

Gallagher said NZ Post had refused to explain how it came to the figures it was using to reach the agreement.

Meanwhile, rural services would be protected with services maintained at at least five days a week.

Roche denied the move was a rural subsidy, but reflected that different parts of the community had different options.

"People who reside in urban areas have lots of other options in terms of technology. We accept that in the rural areas they don't," Roche said, adding that NZ Post believed it could make a commercial return on a five day a week rural service.

Communication Minister Amy Adams said three quarters of the feedback on the proposed changes were on the issue of rural delivery.

Federated Farmers immediately welcomed the reprieve.

"This is great news for rural people, as many businesses are still heavily reliant on a five day service," said Bruce Wills, Federated Farmers National President.

"Whilst technology is changing the way we communicate and eventually we will see a decline in postal deliveries, we are not there yet. There are still some 86,000 rural people off-line, where rural post is a daily fixture in the running of their business and household."

Adams said the deed reflected minimum standards, and the actual service was likely to be at a higher level in some areas.

"It is important to note that three-day delivery is the minimum standard New Zealand Post must meet. This means that New Zealand Post may continue to provide a higher frequency of delivery in some non-rural areas."

The latest deed also requires that there must be at least 880 postal outlets and post centres, however only 240 of these must be manned, with Roche planning an expansion of self-service network.

Today he said over the next five years he expected the number of self-service kiosks would be increased to perhaps 150, and NZ Post acknowledged some in the community were opposed to stores where they did not interact with human customers.

"We're not talking sort of mass closures of the 1980s."