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Wednesday, 28 March 2001
Page: 25962

FRAN BAILEY (11:34 AM) —I rise to speak in support of the Primary Industries and Energy Research and Development Amendment Bill 2001. Australia's forestry industry and wood and paper industries turn over more than $11.5 billion per year and contribute around 1.9 per cent of this nation's GDP. They employ about 82,500 people, including more than 62,000 people in manufacturing and processing wood and paper products. Australia has 863 hardwood mills and 256 softwood mills. There are also 21 pulp and paper mills and 28 veneer and panel board mills. Australia produces about 83 per cent of its sawn timber needs; 36 per cent comes from native forests and 64 per cent comes from softwood plantations. Plantations are expected to supply 70 per cent of all Australian consumption of sawn wood by 2015.

Much of the employment in the industry is concentrated in regional and rural areas such as my own electorate of McEwen where the industry is often the predominant employer in the local community—communities which rely on such activity for their livelihoods. Throughout the entire history of the timber industry there has always been a very strong bond between the industry and the community in which it is located and the industry has always been a major contributor to those communities. To give an example from the history within my region, at the end of the First World War, the Narbethong Sawmill Company donated for a raffle enough timber to provide a home for a soldier, and his family, coming home from the war. Today, more often than not, these businesses will also sponsor the local footy and cricket clubs and they respond quickly to community emergencies. Not only are they important in an economic sense in respect of providing employment; they are also an integral part of the social fabric that keeps small towns alive and vibrant.

Generations of the same families have worked for the same employer developing a sense of loyalty that is reciprocated by employer and employees alike. The industry has a rich and varied history in my electorate. In my community of Healesville there were 14 sawmills at the turn of the century employing over 200 people. The fact that there is now only one sawmill is testimony to how the industry has changed.

Recently the Minister for Forestry and Conservation visited two sawmills in my electorate. A more accurate description of those sawmills would be value added production centres. They demonstrate first-hand how many in the industry have made large capital investments in upgrading plant and equipment, signalling their commitment to greater efficiencies, the production of higher value added product and, once again, a commitment to the local communities in which they operate.

In 1999-2000, Australia imported a total of $3.8 billion worth of mainly paper and high forestry and wood products. The total value of exports was $1.6 billion, including $586 million worth of woodchips, $443 million worth of paper and paper products, and $264 million worth of round and sawn wood products. As can be seen from these figures, Australia has a significant trade imbalance in the area of value added forest and wood products. In the global market where trade barriers are falling and capital is flowing more freely, Australia should be placing itself in a position where it becomes a net exporter of value added forest and wood products. Industry should be competitive in export markets, not only when the Australian dollar is low but at all times, and it must be able to match it with global players in world markets.

This bill will go a long way towards redressing this imbalance and encouraging innovation and research and development in the industry. In a country such as ours, we should not be a net importer of value added wood products. Industry must be encouraged and provided with the right environment in which to develop and become internationally competitive.

Through this bill the Commonwealth funded Forest and Wood Products Research and Development Corporation will now match industry levy contributions to forest research and development dollar for dollar. The Forest and Wood Products Research and Development Corporation funds research into production, processing and marketing links in the industry chain.

Sadly, the previous government decided not to match industry research and development dollar for dollar, instead choosing to amend the act and only contribute one dollar for every two dollars, making it different from all other R&D corporations. This compounded the problem for the industry, as many participants are small businesses who find it difficult to adequately source sufficient capital in order to undertake R&D activity. This also further demonstrates the opposition's ignorance of the real issues facing small business and their total lack of understanding or comprehension of the importance of the timber industry to regional and rural areas. Their continued failure to pass the regional forest agreement legislation is additional proof of this. In spite of what the shadow minister said in the previous speech, to this point of time they still have not given a commitment to pass the regional forest agreement legislation.

The opposition's history of industry policy has been proscriptive and restrictive, with little understanding of the real issues that affect business and the investment environment in which it needs to operate and no understanding that people's jobs are dependent on industry having opportunity for growth. Industry policy needs to be about complementing industry and creating an environment in which industry can grow and be entrepreneurial because, at the end of the day that is the only way that everyone benefits.

The timber industry is characterised by many family owned businesses, and they have found it difficult to fund R&D under the previous formula. This, of course, has hampered many such businesses in capitalising on the benefits that flow from such investments. A Forest and Wood Products Research and Development Corporation which guarantees a dollar for dollar funding commitment will now provide these businesses within the industry with an excellent opportunity to develop a real and lasting competitive and comparative advantage.

There are of course participants in the industry who have already taken the lead in areas of value adding and research and development. I would mention J.L. Gould of Alexandra, Neville Smith Timber Industries from Seymour and Ron Reid Industries of Yarra Junction in my electorate. All of these companies have implemented wide-ranging improvement programs. As well as upgrading their processing area, they have also extended the capacity of their drying process by installing the latest in kiln and reconditioner technology. Gould employs 100 people in Alexandra, Neville Smith employs 60 people in Seymour and Ron Reid employs 18 people in Yarra Junction. Each of these businesses has invested millions in their industry research and development, but most importantly they have invested in the employees who work in their businesses. They are demonstrating a commitment to enhancing the industry through better production processes, reducing wastage and turning it into quality product that enhances their cash flow. Dockings that were formally disposed of locally as firewood are now being turned into quality grade chips and sold to Australian Paper.

What this highlights is the importance of the value chain. The minister referred to this in introducing this bill to the House: the whole of chain approach to industry planning and development. Each link in the chain can play a valuable role in enhancing the product. These links further down the chain benefit each process, and the finished product will be of a higher quality and worth considerably more. We must support the strengthening of this chain if we are to have a positive impact on reversing the trade imbalance that currently exists and on ensuring that employment in regional areas continues.

This imbalance can be reduced through replacing imports and by creating a long-term competitive advantage for the industry which results in developing and increasing exports. If research and development activities are carried out by small individual businesses, the end result of that R&D is likely to be limited and not provide increased opportunities for new markets. This type of fragmented R&D effort is unlikely to produce the range and depth of benefits to strategically benefit industry. The economies of scale are not present for many of the small businesses that are currently in the industry, and it is unfair to criticise such members of the industry for lack of innovation when they are faced with such obstacles. With such a precious resource, we must strategically work to ensure that the maximum value is derived from the use of this product. Already the government has signalled its commitment to innovation through its $2.9 billion innovation policy. This will be complemented by dollar-for-dollar research and development funding through the Forest and Wood Products Research and Development Corporation. In the 21st century, we are going to see dramatic new uses for wood, and this will provide a greater outlet for quality products in more profitable markets.

The November and December editions of the National Forest and Timber Newspaper spoke about the biological revolution presenting marvellous opportunities for the forest industry. Designer wood will be attuned to the market from its genetic inception. In particular, the Southern Tree Breeding Association has entered into partnership with scientific research institutions to develop state-of-the-art breeding technologies for use on plantations. This promotes more plantation of better quality and with less wastage. The benefits with respect to tree improvement will amount to hundreds of millions of dollars in extra revenue per year for the economy for plantation estates.

Wood biotechnology means that the timber industry can employ this new technology in its tree breeding and planting. It means that it will move science into environmental management, innovation into wood processing, logic into the specifications of wood and fibre products, growth in education, training and research, and profit into markets for wood and fibre products. This all adds up to more secure employment for current and future workers in the timber industry. This once again reinforces the importance of the value chain and how each link in that chain benefits the timber industry. The flow-on effects and the results are overwhelmingly positive.

The timber industry faces strong competition from other types of materials such as plastics and metal. However, if the industry can overcome these threats, opportunities are there for it to vastly improve its export performance and help redress the trade imbalance. BIS Shrapnel, in a recently completed study of the moulding and millwork suppliers in industry, notes that an increasing supply of local plantation timber over the next decade will create export opportunities in the United States, Europe and Asia. Timber moulders have the potential to improve levels of exports and import substitution, but only if they are more actively involved in promoting the attributes of wood, such as the durability of its products, its insulation properties and its aesthetic values. The markets are certainly there. US imports of moulded wood products increased by 177 per cent in the eight years to 2000 to an annual value of almost $1 billion. Currently, Chile is the largest supplier of wood mouldings to the US. Wouldn't it be great if Australia could start eating into that market?

The global forest and paper industry represents a supply chain of $750 billion. From plantations right through to value adding processing, each link in the chain can play a valuable role in furthering the productivity and competitiveness of the industry. In order to capitalise on this potential, all the participants must have access to new and developing technology. This bill recognises this requirement. It seeks to actively promote and create an environment in which the industry can be competitive, both locally and internationally, and it will commence from 1 July this year. That is why industry representatives from my electorate that I have spoken to about this legislation give it their full support. As Ron Reid, of Yarra Junction, said just this morning, `This will give more security to the industry.' I commend the legislation to the chamber.