The price is set to increase from $1.20 on April 3 after the government announced it would not stand in the way of the recommended hike proposed by the Australian Competition and Consumer Commission.

It was unlikely Australia Post would recover more than it cost to provide letter services in Australia given the decreased demand, the ACCC found.

Stamps for concession holders won't increase and will remain at 60 cents, while Christmas stamps will also remain unchanged at 65 cents.

The average Australian sends about 15 small letters a year, with the additional increase set to cost an extra $4.50 annually.

"I have carefully considered a number of factors in making this decision, including the ACCC's finding that the proposed increases are on a cost-recovery basis," Communications Minister Michelle Rowland said as justification for the decision.

The minister needed to explain why she approved the hike during a cost of living crisis, the opposition communications spokesman David Coleman said.

Australian Associated Press