Australia Post has committed $51.4 million to struggling small post offices and agents in remote areas, following findings from an independent review by Partners in Performance (PiP) on the payment structure of licensed post offices.

CEO Ahmed Fahour said the money would be delivered by increasing annual payments to about 100 small post offices across the country.

He said that parcel handling rates will also be raised to reflect the cost of delivering the service.

“We’ve been working closely with our licensees to identify how to best support them in the face of digitisation, a significant challenge facing our traditional letters business,” Fahour said.

The financial boost will be delivered from July 1 but the long term future of the scheme depends on postage rates rising to $1 for a standard letter.

PiP examined two areas: the effort to complete transactions to determine the fairness of current payments and how revenue compares to expenses at a store level.

Fahour said that the findings of the PiP inquiry highlighed the complex nature of the challenges facing licensed post offices, and cited the need for diverse revenue streams going forward as mail volumes decline.

“The survey concluded that for most transactions, licensees are being remunerated appropriately, however we recognise there are some areas where we can support our operators better. This includes increased payments for street carded parcels, where the work required to administer this service exceeds current payments.

“The findings of the PiP study show the complex nature of the challenges facing our LPOs. The study also showed the need for LPOs to have diverse revenue streams in light of declining mail volumes,” Fahour said.

According to Fahour, without reform the letter delivery business would lose $1 billion each year.