Transitional assistance fails in Victoria

John Cameron

Industry closures in the Latrobe Valley and surrounding areas of Gippsland have increased and transitional arrangements promised by the Andrews Government have failed. Job numbers have decreased despite the Andrews government spending a huge amount of your taxes in a futile attempt to create more jobs. Source: John Cameron

In Latrobe, South Gippsland, Wellington and East Gippsland LGA’s the number of jobs shrunk, and by up to 8% for Latrobe LGA over the last eleven years. By contrast other regional and rural areas of Greater Shepparton, Greater Bendigo, Ballarat, Mildura and Wodonga experienced job growth of 11% to 37%. Greater Geelong recorded growth of 39% and Melbourne LGA 44% .

The Latrobe Valley Authority (LVA) claims to have created 4,000 additional jobs. The job losses in Latrobe and surrounding LGAs indicate this claim by the LVA is not supported by the facts.

Gippsland and the Latrobe Valley are being cruelled by the Andrews Government’s hasty launch of reckless policies. Policies are rolled out with appalling timing and without a good strategy, sufficient feasibility studies and appropriate consultation.

For example, closing power stations well in advance of the commissioning of replacement renewable power sources, and well in advance of resolving issues with transmission lines, and well in advance of the setting up of domestic manufacturing of components for renewables, and well in advance of setting up environmentally safe recycling of spent components.

Now the Andrews Government has announced the closure of the native forests prior to even starting on the establishment of the plantations that are supposed to replace the 1.0 million cubic metres traditionally harvested from native forests.

Then the Government only promise 14,000 hectares when 50,000 hectares is required to replace the native log supply and another 50,000 hectares is required to replace the shrinkage of the Victorian plantation estate over the last six years (under the Andrews Governments failed plantation policy).

Industry closures in Latrobe Valley (and Gippsland)

Latrobe Valley has been hit by the closure of McCormack Morwell hardwood sawmill in 2011, Morwell Power and Briquette including Morwell Mine in 2014, Auschar Morwell in 2014, Hazelwood Power and Mine in 2017 and Carter Holt Harvey Morwell softwood sawmill in 2017.

These closures probably caused the loss of up to 10,000 jobs in the region (direct employment + production induced + consumption induced).

In February 2023 Opal was forced into an unplanned closure of its M5 Paper Machine with the loss of over 200 jobs, due to the Andrews Government’s inability to supply hardwood pulp logs in accordance with its contractual obligation. Under the Forests (Wood Pulp Agreement) Act, The Government was obligated to supply to Opal 350,000 cubic metres per year of native hardwood pulp log until 2030. Business can no longer rely on sovereign risk – now riskier than junk bonds.

Then in May 2023 the Andrews government announced the ‘unplanned’ early closure of the native forest industry in January 2024. This will result in about 3,600 job losses (direct employment + production induced + consumption induced).

The LVA has spent over $300 million of your taxes but failed to create ongoing jobs

Following the closure of Hazelwood, the Andrews Government in November 2016, established the Latrobe Valley Authority (LVA). The LVA spent approximately $300 million over about six years with the objective of transitioning redundant workers into new jobs. In the budget the Government promised a token amount of $7.2 million for the next financial year 2023-24, which is like putting a Band-Aid on an amputation.

The LVA boasts helping with the investment of $1.5 billion that has contributed to over 4,000 additional jobs being created. Most of those jobs were one-off in construction with very few on-going jobs created, as evidenced by the job losses in Latrobe, South Gippsland, Wellington and East Gippsland Local Government Areas (LGA’s).

Andrews Government to spend more of your taxes on transition

In February 2023 a spokesperson for Victoria’s Minister for Agriculture Training and Skills and Higher Education, Gayle Tierney, said the Victorian Forestry Plan was “providing more than $200 million in business, worker and community support to help the native timber industry transition”.

Then the Andrews Government’s announcement in the May 2023 budget that it brought forward the closure of native forest timber supply from 2030 to January 2024, to give those in the supply chain more certainty! The Governments removing the fundamental raw material from the integrated hardwood timber supply chain will deliver uncertainty to harvesters, haulers, sawmill workers, timber remanufacturers, furniture manufacturers and all the support industries and services.

Gayle Tierney indicated “our focus is on workers and their families”.

“We will back local communities with the financial support, secure jobs and training and one-on-one case management they need,” she said.

The Government announced another $200 million raising the supposed support for the forestry transition to $877 million. However, this includes ‘old money’ – $200 million already promised on the original Forestry Plan and $120 million already promised on the Gippsland Plantation Investment Program (going to Hancock Victorian Plantations).

‘New money’ only includes the $200 million announced in this year’s May budget. The amount of funding is unknown for support payments for Opal mill workers already laid off, and the mill and forest contractors about to lose their jobs. The announcements lack transparency – more smoke and mirrors.

The government’s support fund does not promise replacement jobs

The Government announcement on 23 May 2023 (website) is light on detail about how the support fund will be spent, nor how many jobs it will create, nor how many jobs will be sustainable in the long term. Below is an outline of the support fund with my comments in italic:

• Forest contractor workers can contract for forest management works on bushfire risk reduction. There is no mention of how many jobs this will provide, nor where, nor for how long.
• TAFE will retrain workers, helping them get jobs in growing regional industries like construction, agriculture, transport, and manufacturing. Where will the new jobs be given a lot of construction, agriculture, transport and manufacturing are actually declining in the region, adding to the loss of jobs in mining, power generation, pulp and paper, sawntimber and dairy processing.
• Up to $8,000 in retraining vouchers for courses inside and outside the TAFE Network. The most valuable training is ‘on-the-job’ but where are the jobs to come from?
• Financial and mental health support covering out-of-pocket costs.
• Industry support payments will also continue as needed until the transition is finalised. There is no mention of when the transition will be complete, nor how much the industry support payments will cost – vital information given that job losses in Latrobe LGA indicate that the Hazelwood transition failed.
• The dedicated Opal Worker Support Service will support every impacted worker at Maryvale. There is no detail on how long will the support last for and how much will it cost.
• All native timber mills will be eligible for a voluntary transition package, whether they choose to stay in timber processing or switch to other industry sectors. There is no mention of what sectors, nor raw materials, nor products, nor markets for these ‘other industry sectors’.
• Mills that stay will be able to access investment support through the Timber Innovation Fund. This fund will provide grants of up to $1 million for projects that create significant jobs, have local community benefit and require a co-contribution by the applicant. This involves a 14 step process that takes months. Also capping of grants at $1 million will preclude large projects with the scale economies capable of generating thousands of sustainable jobs required to replace those jobs lost.
• The Supply Chain Resilience package will support business continuity and provide assistance to help manufacturing and other businesses make the transition to future opportunities. Straight from the spin doctors handbook. Sounds too good to be true and it is, because they don’t identify the manufacturers and businesses that are going to deliver these future opportunities.
• Local Development Strategy grants of $360,000 to $500,000 per community to do studies and develop roadmaps on potential new industry to create potential new jobs. This is an old initiative and the allocation is already exhausted – this is hoodwinking the community.
• Government will deliver 1.8 million hectares of public land currently subject to the timber harvesting allocation order. This is a misrepresentation of the facts as the VicForests ‘operable area’ available for harvesting was only 0.16 million hectares and all of the 1.8 million ha of State Forest, including the ‘operable area’, are public land.
• The Andrews Government’s Forestry Plan will fail
• The Andrews Governments ‘Forestry Plan’ will fail because it impairs the critical success factors for a dynamic and sustainable forest and forest products industry and Agricultural sector in Gippsland.
• There is no longer sufficient resource (raw material) available now to deliver the scale economies required to support investment in large scale pulp and paper and sawntimber manufacturing in Gippsland. The loss of 1 million m3 pa of native forest logs and the 50,000 hectare shrinkage of the Victorian plantation estate under the Andrews Government’s watch will irreparably damage the integrated industry.
• There is unlikely to be a few billion dollars of patient capital to invest in the plantation expansion the industry requires, particularly given the risk of future regulatory constraints on plantations by future governments that do not understand the forest and forest products business.
• There is insufficient land that is suitable, affordable and within economic haul to deliver the extra 100,000 hectares of plantation required – Most of Gippsland is native forest.
• Farmland converted to plantations will result in the loss of scale economies and loss of jobs in Agriculture and processing of Agricultural produce.
• Land is a finite and scarce resource – With land there is no magic pudding as assumed in the Andrews Governments Forestry Plan.
• Multiple use of our native forest land is necessary to deliver a sustainable supply of timber, given the scarcity of agricultural land in Gippsland suitable for plantations. However, the Andrews Government has precluded multiple use by the closure of the tiny area that was harvested each year – about 3,000 ha harvested each year within a huge 7.5 million hectares of Victorian native forest.
• New plantation will only deliver extra logs in about 25 to 30 years. Mill expansions with associated job creation need known projected log supply based on what is already planted. No rational mill manager will invest in mill upgrades based on the ‘Forestry Plans’ inadequate and speculative future planting program, particularly given that the Governments Forestry Plan has delivered no new planting in the four years since it was launched.

Transitional arrangements will fail timber workers, their families and communities

Without a comprehensive strategy for large new industries that are close to up and running, the Andrews Governments transitional arrangements will fail.

Many timber workers will be forced to sell their homes at a discounted price into an oversupplied local market and move to get employment, disrupting family and community connections. Some will move to Melbourne putting pressure on Melbourne’s scarce housing and congested infrastructure. Others will be forced take fly-in fly-out jobs with adverse family consequences. Others will undertake the government retraining and still struggle to find a job.

The viability of the local service and support businesses, who are to receive no meaningful government support, will be weakened and some will be forced to close.

Many community organisations that are the lifeblood and fabric of rural society will fold (e.g. service clubs, sporting clubs etc.). Schools will close because of declining pupils and many towns will struggle to attract the doctors, health workers etc. required.

The Government decision is a disaster for rural and regional development, Gippsland forests, global sustainability, human rights and world peace. However, whether by design or accident, it is good news for Chinese exporters of wood products processed with coal fired power. It is also good news for Russian exporters of logs (conflict timber) and energy into China (there has been a huge increase in volumes of Russian coal, oil and gas into China following the invasion of Ukraine).

John Cameron (Dip Hort. Burnley, MBA Monash, and tertiary units in economics, mathematics and statistics) is a forestry and business consultant previously holding positions in General Management, Corporate Development and Research in forestry and forest products. Former roles include Chairman of Private Forestry Gippsland, Chairman Southern Tree Breeding Association, Chairman Australian Research Group on Forest Genetics, Board Member CRC for Forestry Hobart & CRC for Pulp and Paper Science Monash.