The competition watchdog has given its approval for Australia Post to raise the cost of a basic stamp from 55 to 60 cents.
The Australian Competition and Consumer Commission (ACCC) says it will not object to Australia Post's proposed price increases because the Government-owned company is facing a loss in its mail services this year, despite efforts to cut costs to meet falling demand for traditional snail mail.
The ACCC has statutory powers to assess proposed Australia Post price increases in areas where it has a monopoly: mail collection, mail distribution and the issue of postage stamps.
The price rises in letter services are proposed to take effect from June 28 and will apply to small, large and pre-sort letter services.
However the ACCC has also warned Australia Post not to expect further price rises to be allowed over the next two years.
"In 2009 the ACCC objected to Australia Post's proposed price increases due to concerns Australia Post's costs were not falling in response to declining volumes," ACCC chairman Graeme Samuel said in a statement.
"However based on the current forecasts of letter volumes and costs, the ACCC considers no changes to the basic postal rate should be required for the next two years beyond those proposed for June 2010."
The competition watchdog says further reforms may be needed in Australia Post as mail volumes continue decline in order for it to keep meeting its community service obligations while remaining profitable overall.