Report finds plantation fibre supply security is critical
Study of socio-economic impacts of the softwood plantation industry in the South West Slopes and Bombala region, NSW. This report is the first of six socio-economic studies being undertaken for the FWPA.
Across Australia, more than 80% of the wood fibre and timber used by wood and paper processors is supplied from Australian softwood and hardwood plantations. However, this plantationbased industry is challenged by a lack of investment in new plantations, and to remain competitive industry requires ongoing investment in the plantation estate as well as in integrated hubs of processing facilities located near plantations.
The South West Slopes and Bombala region of New South Wales is an example of this type of integrated processing hub. The region is the base for a large wood and paper processing industry that has developed in proximity to 165,000 hectares softwood plantations established in the region from the 1920s onwards. Despite the importance of the industry to this region, which includes the local government areas of Albury City, Shire of Bombala, Greater Hume Shire, Snowy Monaro Regional Council, Snowy Valleys Council and City of Wagga Wagga, there is little current data on the socioeconomic contribution of the industry to the region, or the key areas in which investment is needed in skills and training to help maintain the industry into the future. This study addresses this gap, collecting data via a survey of the industry and analysis of data produced in past studies and by the Australian Bureau of Statistics. This enabled production of upto-date information on the value of the industry, the jobs it generates, its contribution to the region, and the skills and training needs of the industry.
The softwood plantation industry in the South West Slopes and Bombala region (referred to as the ‘South West Slopes’ region) has grown substantially over time as more of the plantation estate reaches harvest age and the total volume of log production expanded in the region, with older plantations now in their third rotation. The regional industry based on these plantations provides a market for logs of different sizes.
Utilisation of all logs
Sawlogs (generally straight logs with larger diameter and few knots) go to sawmills, with residues from the sawmilling process then being supplied to composite wood manufacturers and
• Gross value of final output from the industry was $1,050 million in 2015-16
• $155 million in wages boosts regional economy
• Level of employment is particularly significant for the region
• Growing demand for workers with specialised skills
• Industry cautiously optimistic in terms of outlook for business conditions
pulp/paper mills. Pulp logs go to pulp and paper mills in the region as well as to composite wood product manufacturers. This enables utilisation of all logs from plantations in the region. Fibre demand from the processors now established in the region exceeds the production ability of the local plantation estate, with additional resource brought in from other regions, particularly northern Victoria. A key constraint to any further expansion of the industry is sourcing fibre, with the local industry fully utilising all the fibre available within an economic transport distance of the region. Both existing processors, and new processors, such as the cross laminated timber (CLT) manufacturing plant being constructed in Wodonga by
XLam, require security of supply of plantation fibre to be successful.
The gross value of final output from the industry was $1,050 million in 201516, and $2,130 million when flow-on effects to other industries are included.
Contribution to Gross Regional Production (GRP) (or the ‘value-added’ to the economy excluding transfers between industries) in the region was $1,014million, including $580 million from flow-on effects. The industry is thus a significant component of the regional economy. The direct net expenditure of the industry (the amount spent by the industry, rather than the sales value of its output), was $734.8 million in 2015-16. Of this total expenditure, just over 80% was contributed by the wood and paper processing sector, with the balance fairly evenly split between forest growers and the contracting sector.
Largest component was wages
The largest single component of expenditure for the industry overall was wages and salaries, with $155 million injected directly into the regional economy via household incomes. Including flow-on effects, the total contribution of the industry to household income in the region was $468 million in 2015-16.
The industry directly employed 1917 people in the region as of February 2017, with 66% of these (1260 jobs) generated by wood and paper processing. When flow-on effects of the industry on other industries are included – meaning the number of jobs generated as a result of the demand generated by the industry and its workers -the direct and flow-on employment generated by the South West Slopes softwood plantation industry provides jobs for a total of 5,375 people within the region, and for 6,026 people across NSW as a whole.
Significant employment for region
This level of employment is particularly significant for two local government areas (LGAs), with 22% of jobs in Bombala Shire directly dependent on the industry, and 18% in the Snowy Valleys Council local government area. When indirect employment is added, more than 50% of jobs in each of these LGAs is directly or indirectly dependent on the plantation industry of the South West Slopes.
Analysis of time series data suggests that the total amount of jobs directly dependent on the forest industry in the South West Slopes has declined by approximately 5%, or slightly less, in the last six years. This is not surprising for an industry in which a large proportion of jobs are reliant on manufacturing: investment in new technology in the manufacturing sector, a requirement for maintaining competitiveness over time, typically results in declining employment even as production volumes are increasing. A similar decline (5.2%) occurred in the total number of manufacturing jobs in Australia over the five years from 2006 to 2011.
Examination of the demographic characteristics of the industry shows that the industry is offering fulltime, long working hour jobs that have good pay and are particularly attractive to men, and is maintaining recruitment of men into the industry in most parts of the industry. The biggest socio-demographic challenge is to achieve recruitment of a greater diversity of workers, particularly women, into the industry. This may be achieved through actions such as offering jobs with more flexibility in terms of work hours, but will likely also require challenging and changing key aspects of the culture of the industry that continues to make it more appealing to male than female workers.
Specialist skills in demand
As the softwood industry evolves, there is growing demand for workers with specialised skills, including specialist engineers, scientists and mechanics. More generally there is increasing demand for skilled mobile and fixed plant operators. Demand for less skilled factory process operators is declining. A need to have a skilled haulage workforce and to have workers withhigh level financial, middle management and information and communication technology (ICT) skills remains strong, with ICT skills needs occurring across most occupations within the industry.
While many businesses use registered training organisations to provide skills training, the industry workforce continues to have lower than average formal educational qualifications.
Investment in training
This presents a key challenge for the industry, with formal educational attainment providing not only specific competencies, but also providing the base skills (in literacy, numeracy and overall learning skills) needed by workers to continue to learn new skills and adapt to ongoing change in the industry associated with increasing efficiency and productivity. This suggests a strong need to continue to strengthen investment in providing formal accredited training opportunities for the workforce, which cover the diversity of competencies identified as important across the industry.
Recruiting skilled managers and professional staff, transport workers, finance managers and heavy machinery operators is difficult for many businesses in the region, suggesting a critical need to address the challenges that are causing a lack of skilled staff. These challenges include a lack of suitably skilled local workers, the high cost of inhouse training of staff, and difficulty attracting skilled workers from elsewhere to live in the region.
Overall, the industry was cautiously optimistic in terms of the outlook for business conditions, although many operators felt business conditions were more challenging than usual. Most felt demand for their services or products would remain stable over the next 12 months, and few felt it would decline. Most reported being slightly to moderately profitable, and few reported difficulties with either servicing of debt or business cash flow. Most were planning to invest in their business, but this cautiously optimistic outlook will not bring employment growth.
A key challenge for the industry is ensuring access to a suitable supply of fibre for wood and paper processors. Given that a significant proportion of inputs are sourced from outside the region, this is a critical factor affecting the ability of processors to further invest. Maintaining competitiveness in a market place with increasing competition from imports was also identified as a key challenge. For contractors, lack of certainty about future contracts reduced their ability to invest in their business. Falling prices, rising input costs, difficulty obtaining labour and poor telecommunications were the four most commonly reported challenges experienced by businesses in the last three years.
For the future, the workforce is likely to remain at current levels, although there could be some slight decline as a result of improvements in labour efficiency and productivity. Skills required will include a large number of workers needing to have the skills to interface with often complex compliance/ accreditation systems, for large numbers of workers, an increasing need for a number of specialized professionals, and a strong requirement for generic skills such as business and financial management.