Australia Post’s last ditch stand to revive its financial fortunes through its much-vaunted Digital Mailbox could soon be dead in the water.

Communications Minister Malcolm Turnbull has revealed the federal government will now offer state and local governments free access to the myGov online transactional hub, an overture which if accepted threatens to scuttle Post’s commercial plans for an almost exclusive digital one-stop-shop.

In a well-received speech to an industry breakfast hosted by Enterprise Ireland in Sydney, Mr Turnbull revealed his pursuit of the government’s stated election commitment to have 80 per cent of federal government services and transactions available online by 2017 would not be delayed by any attempt by the bleeding mail monopoly to carve out a financially viable digital niche.

After declaring its first real loss in the second half of the 2013-2014  financial year Post is running out of time and he government is running out of patience.

“Many of you will be familiar with the great work that is being done with myGov,” Mr Turnbull said.

“We want everybody to have access to one, single digital mailbox which we will make available to all governments for free – I mean state and local – so that there is greater and greater incentive for people to interact with government digitally.”

Government News has confirmed that the single, digital mailbox Mr Turnbull referred to is myGov and not Post’s Digital Mailbox.

Aside from improving citizen interactions online, Mr Turnbull said there was an obvious reduction in the “cost communication for government” and that this represented a big savings opportunity.

The Communications Minister also candidly admitted that the move to extend myGov did not bode well at all for Australia Post, which falls under Mr Turnbull’s portfolio.

“It further undermines the economics of my other responsibility – Australia Post,” Mr Turnbull said.

“But I figure that that is inevitable. That letters business doesn’t have a great future. So that’s the most important thing we can do.”

The extension of the myGov platform into new jurisdictions represents a potential bonanza for state and local government agencies, not least because it will offer them an established, trusted and proven framework to extend out their own digital services and reap their own savings.

It could also achieve big ticket IT infrastructure savings if a deal was finally thrashed out to harmonise Commonwealth, state and local government standards – such as those surrounding IT security and hosting – to be put into a common framework that all jurisdictions could access . . . rather than recreating a digital version of the rail gauges dilemma.

However the extension of myGov to states and councils is also the strongest signal to date that Australia Post is on borrowed time to get its financial act and digital services together and cannot expect to be handed a near monopoly on official electronic correspondence as an emergency flotation device.

Over the last few years Australia Post has lobbied intensely to effectively be given a license to become the default interface for citizen transactions for most government services – a business model largely predicated on deriving revenue from electronic bill payments and presentation.

However its bid to get a foothold in that market has been hampered by two main factors.

Firstly, bank-owned BPAY has garnered the lion’s share of the market in facilitating low cost direct payments from bank accounts after Australia Post put its own efforts to make POSTbillpay work online on ice in 2007 after seven years of poor uptake.

Secondly, the longstanding goal federal government agencies to build a single, secure online transactional multi-agency transactional portal for citizens through myGov is substantially more advanced than Post’s own efforts and much less legally complicated in terms of sharing highly sensitive personal data with what essentially amounts to a commercial third party.

In August Australia Post’s chief executive, Ahemed Fahour, cautioned that in the event the government pursued its stated target of getting 80 per cent of government communications online by 2017, Post’s letter volumes “will literally fall off a cliff”.

In the same month, federal Human Services Minister Marise Payne and Mr Turnbull also revealed that Post would be allowed to display the contents of peoples’ myGov accounts on an opt-in basis.

Although the announcement that Post’s Digital Mailbox can render a view of myGov is significant, it still falls well short of being able to execute transactions – a primary consumer expectation for similar commercial services.

It is still somewhat unclear whether that handbrake on transactional functionality stems from technical complexities in integrating Post’s Digital Mailbox with myGov huge reach into the back end of multiple Commonwealth systems – or a deliberate stand by agencies to limit who can tunnel into networks like those operated by the Australian Taxation Office, Centrelink and Medicare.

However it is understood that there is now little appetite to allow Post to become the sole provider of third-party online connectivity into government systems for at least two reasons.

One is that if myGov was to be outsourced outsource to Post, it would be essentially replicating work undertaken by other government entities and constitute the government outsourcing to itself, a move that contradicts stated policy aims of opening more work to the private and non-government sector.

The second is that restricting access from other commercial providers would be akin to picking winners and could act to constrain sorely needed innovation and competition.

It is believed that while Post will be given what amounts to a head start in the digital services stakes, other market entrants will over time be allowed to participate, ultimately forcing Post to sink or swim.

“Part of our policy is to ensure by 2017, all interactions with the federal government, or all major interactions that involve a reasonable number of people can be conducted end-to-end digitally,” Mr Turnbull said in at the Enterprise Ireland breakfast.

“I think the most effective thing we can do in terms of moving our economy onto a digital plane is to get government onto a digital plane.”