“Clearly it's very challenging," Chief executive Christine Holgate said.

"If a business is down... $102 million in profit, that’s one massive climb we have to get up.

"Without some kind of difference we will have a problem."

Australia Post said the cost of delivering letters was up 10 per cent since the last postage stamp price increase, in January 2016, as delivery address increased by half a million but annual letter volumes fell by 800 million.

Ms Holgate said it was not in the process of applying for a further stamp price hikes, but was taking other steps to leverage its footprint to increase profits.

That included having mail posties deliver more parcels, and to that end had recently ordered 1000 three-wheeled electric motorbikes that can carry twice the number of small parcels.

Meanwhile, $121 million in costs had been cut out of the business through productivity improvements.

Ms Holgate said e-commerce remained the major driver behind growth in the parcels business - with stand-out performance in express deliveries. Revenue from that service was growing at 30 per cent, she said.

There was still significat growth ahead for e-commerce in Australia, Ms Holgate said, with online now accounting for only 9 per cent of total retail sales compared to 20 per cent in Europe.

Australia Post declared a $38 million dividend to its shareholder, the Australian government, up from $33 million in the first half last year.