FAIRFAX Media will cut 550 jobs in Australia and New Zealand, including about 50 editorial positions at The Sydney Morning Herald and The Sun-Herald .

The publisher began talks with union representatives yesterday after revealing the redundancies just days after it said earnings at its metropolitan newspapers slid 8.9 per cent in 2007-08 because of weaker advertising demand and the continuing drift of classifieds to the internet.

Media companies have been affected by the slowdown in the global economy over the past months. The fallout in finance markets and a slump in consumer confidence had eroded advertising demand.

The Fairfax chief executive, David Kirk, said the program was "not just a reaction to today's market conditions, but it's a reaction to the realisation that we have to be lean and more agile and fundamentally a different company if we want to succeed in the modern media world".

Mr Kirk said the targeted $50 million in annualised cost savings would "hold us in good stead for years to come".

A Media Entertainment and Arts Alliance spokesman, Mike Dobbie, said: "It's a gut reaction that reducing costs is going to be the salvation of media groups who are struggling in these difficult times. One would have thought that the way to attract readers is to produce the best quality journalism we can."

Fairfax will trim its corporate head office and seek voluntary redundancies across its newspapers in New Zealand and the Australian metropolitan papers.

The Herald and The Sun-Herald editorial staff will shift to a seven-day staff work roster that will combine some production processes.

Some work will also be outsourced, the company said.

Fairfax Media's share price rose almost 5 per cent to $2.98 yesterday.