FORESTRY REPORT

Mr PEGLER (Mount Gambier) (14:54): My question is to the Minister for Manufacturing, Innovation and Trade. Can the minister inform the house about the release of the report by the VTT Technical Research Centre into the forestry industry on the Limestone Coast in Mount Gambier today?

The Hon. T.R. KENYON (Newland—Minister for Manufacturing, Innovation and Trade, Minister for Small Business) (14:54): As it happens, I can, and I also take this moment to thank the member for Mount Gambier for his deep interest and advocacy on behalf of his constituents and the industry in the South-East, because there is hardly a more steadfast proponent of the industry or a more steadfast advocate for the industry in the South-East than the member for Mount Gambier.

The VTT Technical Research Centre of Finland has been engaged by DMITRE through Regional Development Australia to undertake a study of the cellulose fibre industry in the Limestone Coast area. I was pleased to be able to travel to Mount Gambier for the release of their stage 1 report for final consultation this morning. In launching stage 1 of the study, VTT set out today how the forestry industry can be transformed in the Limestone Coast region so that it generates more value-adding to the economy.

Over half—in fact, 52 per cent—of South Australia's softwood harvestings are processed into woodchips and paper. This is a very low level of value-adding and the study aims to address this and the vulnerability of the industry due to cost challenges internationally. That is why this study is an important project for South Australia's economy. Developing higher-value forestry products is the key to creating a sustainable future for the forestry industry.

The report provides a snapshot of how the industry is performing now, and VTT has outlined a detailed set of industry findings, including that there is a general agreement on the need to renew the industry; in the absence of a pulp mill in the Mount Gambier area, the use of chips and sawdust for bioenergy, biochemical or biomaterial generation should be given serious consideration; the future of the industry should not be based on a low Australian dollar; raw material in the Green Triangle is cheaper than corresponding material in Scandinavia; average sale prices in Australia for sawn timber appear higher than prices in northern Europe; low profitability in Australia appears to be linked to poorer yield for average-sized logs; the industry has not been implementing modern process technologies; and a more highly trained workforce is necessary to improve industry profitability.

The study highlighted that, to continue to provide strong business opportunities and secure employment, it must change. It sets out how the industry can improve with the introduction of greater efficiencies, better use of technology and diversification into new high-value production and supply chains. It addresses the potential for international investment in this industry and where it might come from. The study was assisted by interviews with more than 20 industry groups and I was also pleased to meet with industry leaders both yesterday and this morning. I also met with key local government leaders who will be important in assisting the industry to meet these challenges.

I was also pleased to announce in Mount Gambier this morning that, due to the success of stage 1, the South Australian government and the commonwealth government have reached an agreement on a $580,000 package to fund stage 2 of this study. This co-investment package includes a $330,000 commitment from the state government and a generous $250,000 contribution from our commonwealth counterparts. This brings the total investment in this study to more than $1 million, with $500,000 already committed under the state government's Manufacturing Works strategy for stage 1.

Stage 2 will now take the work of stage 1 forward into a more detailed road map for the industry. This will involve an analysis of local industry readiness to take up new technology, consultation with the industry globally (particularly in northern Europe), preparing a draft agenda for joint research and development projects, and policy recommendations to state government. I am advised that stage 2 is scheduled to conclude in June 2013. I look forward to receiving the stage 2 road map and working with the forestry industry and the Limestone Coast to deliver on it and build stronger businesses with better, more secure jobs.