Both sides of federal politics concede Australia Post has to change the way it delivers letters - and how much it costs - in order to survive.
The business is seeking an almost 43 per cent increase in the price of basic stamps, while seeking a longer delivery period.
Australia Post has asked the Australian Competition and Consumer Commission to approve the 30 cent price increase for standard letters to $1 and allow it two business days for delivery.
In its submission, released on Friday, the agency also seeks to increase the cost of sending large letters over 125g and up to 250g, from $2.10 to $3.
The charges equate to a 42.86 per cent increase, however, it's not proposing to increase the price of concession stamps (60 cents) or for Christmas cards (65 cents) and insists the "basic postage rate remains affordable".
It argues the volume of letters peaked in 2008 and has been falling steeply ever since.
"The advance of digital communications technology and mobile devices have led to the rapid substitution of letters as a form of communication," Australia Post told the commission.
Treasurer Joe Hockey agreed increasing the price of stamps would help ensure the survival of Australia Post.
But he denied the business would be privatised.
"Increasingly people are communicating by phone, text message, by email," he told reporters in Tasmania on Friday.
Opposition Leader Bill Shorten said a change to the business model was necessary.
But he told reporters in Perth it was also important to make sure that pensioners are not priced out of being able to send mail.
In March, the federal government approved Australia Post's request to introduce a two-speed letter delivery service.
The regular service will be delivered two days slower than the existing timetable from January 4, 2016 with a separate priority service.
The company hopes to implement its new prices at the same time.
The commission will now assess the proposal, taking into account the level of increase, how efficient Australia Post is at managing its costs and whether its forecasts of falls in mail volumes are reasonable.
The watchdog is seeking submissions from stakeholders and members of the public, with a preliminary view to be released in November and a final decision due in December.
Unions said Australia Post had jumped the gun on the price rise with the watchdog yet to rule on it.
A hike would negate the need for a slower postal service, the Communications, Electrical and Plumbing Union NSW Secretary Jim Metcher said in a statement.
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