One of the country's oldest companies, Australia Post is forecast to go heavily into the red if it continues to offer its failing letters business.

Its 32,000 staff are expected to be told of the job cuts on Tuesday, with most of the cuts to be in Melbourne and Sydney.

The everyday home delivery of standard-priced mail is expected to be another casualty of the crisis.

If Australia Post wins sought-after approval to change government regulations, standard mail will be delivered only two or three days a week, instead of the present five days.

The Sun-Herald 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 present path.

Losses in the letters delivery business 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.

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

About 70 per cent of the job losses will come from Melbourne, where the head office is located. About 15 per cent of cuts will be in Sydney. A smaller number of jobs will disappear in Brisbane and elsewhere.

A spokesman for Australia Post said: ''Australia Post has made it very clear that it is confronting dramatic change due to the impact of declining revenues in our letters service. It is already responding to those changes and is a much leaner organisation than it was three years ago. The net impact of these and other changes we need to make is still being worked through but supporting our people through these changes remains our top priority."

Australia Post executives have long lobbied the government to reduce its five-day mail service to three days as the company is required by regulation to deliver five days a week to 98 per cent of homes and businesses across the country.

The job cuts - which follow a freeze on external recruitment last year - will be sold to staff and the public as being necessary to pay for the many "innovations" announced by the company. These include introducing Saturday parcel deliveries, Saturday express post services and extended weekend trading.

Australia Post chief executive Ahmed Fahour had been warning colleagues and the government of the company's impending financial crisis unless urgent reforms were taken.

Mr Fahour, who 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."

Mr Fahour added: "Without change and reform, Australia Post will not be able to survive.''

Australia Post's most urgent problem is that while the population is growing and people are building more homes and apartments - thereby increasing the spread and cost of deliveries - they 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 company's regulated letters business. The letters business lost $122 million in 2010-11, $187 million the following year and $218 million last financial year.

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

A spokesman for Communications Minister Malcolm Turnbull declined to comment.