Economic Analysis of the Timber Industry - Specialised industry sector analysis for the Wellington and East Gippsland regions 2021
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Economic Analysis of the Timber Industry Specialised industry sector analysis for the Wellington and East Gippsland regions 2021
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02 I Victorian economic update and outlook
Contents
INDU S T R Y OVERVIE W 02
IMPA C T OF NATIVE LOGGING BAN 13
SWOT A N ALYSIS 18
03
Wellington and East Gippsland I Timber Industry Economic Overview I 01
OVERVIEW & KEY
FIGURES
This r e p o rt presents an overview of the T i m b e r
$311M 1,096
Indu s t r y i n the shire s of Wellington and E a s t
Gipp s l a n d . SALES JOBS
In t e r m s of this report, the Timber Indus t r y r e l a t e s
main l y t o the following industries:
Fore s t r y and Logging
Fore s t r y and logging Support Services
Wood P r o d uct Manufacturing
Timb e r P r oduct Wholesaling
The r e p o r t presents key economic data f o r t h e
indu s t r y as well as workforce character i s t i c s . 123 HEYFIELD
Esti m a t e d impacts resulting from the pl a n n e d b a n o n
logg i n g i n native forests is also explore d . BUSINESSES KEY NODE
The r e p o r t concludes with a SWOT anal y s i s f o c u s e d
prim a r i l y o n logging and supply chain in d u s t r i e s
(e.g . s a w mills).
02 I Wellington and East Gippsland I Timber Industry Economic Overview
SHARE OF TOTAL ECONOMY CONTRIBUTION TO
Output 3.2% 2.0%
ECONOMIC VALUE
In 2 0 1 8 / 1 9, the Timber Indu s t r y contributed $311
Value Added 2.0% 1.6% mill i o n i n direct out put and $101 millio n i n d i r e c t
valu e a d d ed. This represented 3.2% of t h e t o t a l
0% 2% 4% 6% Well i n g t o n & East Gippsland's output an d 2 . 0 % o f
Valu e A d d ed.
Source: NIEIR
When f l o w on effects are taken into acc o u n t t h e
Sect o r c o ntributed $514 million in total o u t p u t
SUB-INDUSTRY SHARES and $ 1 7 9 million in value added..
Forestry Support Services
7.4%
$311 + $204 = $514M in Total Output
DIRECT INDIRECT
Wood Product Manufacturing
Forestry and Logging 51.4% $101 + $78 = $179M in Value Added
38.4% INDIRECT
DIRECT
Source: NIEIR
Wellington and East Gippsland I Timber Industry Economic Overview I 03
DESTINATION OF $60M Int'l Exports
OUTPUT
In 2 0 1 8 / 1 9, 70% ($215M) of direct sales / o u t p u t i n
the T i m b e r Sector was exported.
$155M Domestic Exports
This m e a n t the Sector generated 5.9% of
Well i n g t o n and East Gippslands' total exp o r t
valu e .
Wood P r o d uct Manufacturing generated t h e
$94M Local Sales
majo r i t y ( 7 7%) of in ternational exports.
Fore s t r y and Logging generated the ma j o r i t y
(70% ) o f overseas exports. SUB-INDUSTRY DESTINATION OF OUTPUT
Forestry and Logging
Wood Product Manufacturing
Agriculture, Forestry and Fishing Support Services
Basic Material Wholesaling
0 50 100 150 200
Local Domestic International
Source: NIEIR
04 I Wellington and East Gippsland I Timber Industry Economic Overview
SHARE OF TOTAL ECONOMY CONTRIBUTION TO
Local Jobs 2.9% 2.0%
LOCAL EMPLOYMENT
0% 1% 2% 3% 4% 5%
The T i m b e r Sector directly supported 1, 0 9 2 j o b s
Source: NIEIR in 2 0 1 8 / 1 9 with a further 693 indirect jo b s f o r a
tota l i m p act of 1,785 jobs.
This l o c a l sector's direct jobs represent e d 2 . 9 %
of W e l l i n gton and East Gippsland's tota l j o b s i n
2018 / 1 9
SUB-INDUSTRY SHARES
Forestry Support Services
10.6%
1,092 + 764 = 1,856 Local Jobs
DIRECT INDIRECT
Wood Product Manufacturing
47.3%
Forestry and Logging
40.1%
Source: NIEIR
Wellington and East Gippsland I Timber Industry Economic Overview I 05SPECIALISED
INDUSTRY FOR THE
REGION
The T i m b e r Industry is a competitive st r e n g t h f o r
the W e l l i ngton and East Gippsland Regio n .
Look i n g a t jobs numbers by sub-industry , t h e
Well i n g t o n Shire is in the top 10 locatio n s i n
Aust r a l i a f or Forest ry and Logging and
Sawm i l l i n g.
East G i p p sland is in the top 10 for Fores t r y
Supp o r t S ervices.
Source: ABS Census, 2016
06 I Wellington and East Gippsland I Timber Industry Economic OverviewCHANGE OVER TIME 500
Sales
Value Added
400
Outp u t i n the sector peaked in 2016/17 a t $ 4 3 6 M , b u t
has s u b s e quently fallen to $310.7M in 2 0 1 8 / 1 9 . V a l u e
Adde d a l s o peaked in 2016/17 at $150. 3 M . I n 2 0 1 8 / 1 9 i t 300
was e s t i m ated to be $101.3M
200
Loca l J o b s in the sector grew strongly be t w e e n 2 0 1 4 / 1 5
and 2 0 1 6 / 17, before declining in recent y e a r s . G r o w t h i n 100
loca l r e s i d ents who work in the sector ( i n s i d e a n d
outs i d e t he LGA) mirrored this trend. H o w e v e r , r e c e n t
0
fall s i n e m ployed re sidents have not bee n a s s t r o n g a s 2015 2016 2017 2018 2019
the l o c a l j ob falls su ggesting residents a r e m a i n t a i n i n g
empl o y m ent outside the region. Source: NIEIR
Jobs
Sect o r m o vements parallel a drop in the v a l u e o f n a t i v e
hard l o g production in that state as a wh o l e o v e r t h e 1,500
Employed Residents
last f e w y e ars.
1,000
GROSS VALUE
OF NATIVE
HARD LOGS 500
HARVESTED,
VICTORIA
0
2015 2016 2017 2018 2019
Source: ABARES,2020
Source: NIEIR
Wellington and East Gippsland I Timber Industry Economic Overview I 07SHARE OF TOTAL ECONOMY
Log Sawmilling, Resawing and Woodchipping
BUSINESS NUMBERS
8.7%
2.9% Logging
33.3%
Wooden Product Manufacturing
23.8%
In 2 0 1 9 , a third of all GST registered Ti m b e r
busi n e s s e s were in Logging (42 in total ) . A n o t h e r
thir d ( 3 2 %) were in Forestry & Support Se r v i c e s .
Forestry & Support Services
31.7%
Regi s t e r e d business numbers declined b y 1 9
busi n e s s e s between December 2014 an d 2 0 1 6 ,
Source: ABR, 2020
led b y f a l l s in Fores try (-13). However, s i n c e
2016 b u s i ness numbers have been relat i v e l y
SUB-INDUSTRY SHARES stab l e .
150 Logging
Forestry &
100 Support Services
Wooden Product
50 Manufacturing
Log Sawmilling,
Resawing &
0
2014 2015 2016 2017 2018 2019
Woodchipping
Source: ABR, 2020 Other
08 I Wellington and East Gippsland I Timber Industry Economic OverviewWORKFORCE PROFILE
2.5%
In 2 0 1 6 , t h e Welling ton and East Gippsla n d ( W E G )
Timb e r S e ctor workforce is generally ma d e u p o f
Aust r a l i a n born, middle aged men.
They w e r e generally less qualified than t h e
gene r a l W ellington and East Gippsland w o r k f o r c e
but m o r e likely to be working full-time a n d
earn i n g h igher salaries
Source: ABS Census, 2016
Wellington and East Gippsland I Timber Industry Economic Overview I 09OCCUPATIONS AND
QUALIFICATIONS QUALIFICATION LEVEL OF WORKERS, 2016
In 2 0 1 6 , t h e main oc cupations of worke r s i n t h e W & EG Timber W & EG Total Victoria Total
Well i n g t o n and East Gippsland Timber Se c t o r
were F a c t ory Workers and Machinery Op e r a t o r s .
60%
The t o p f i e ld of stud y areas for qualified w o r k e r s
were : B u i lding; Manufacturing Engineeri n g ; a n d
40%
Mech a n i c a l Engineering
20%
0%
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Source: ABS Census, 2016
Source: ABS Census, 2016
10 I Wellington and East Gippsland I Timber Industry Economic OverviewAGE BREAKDOWN OF WORKERS, 2016 AGE PROFILE
2.9%
W & EG Timber W & EG Total Victoria Total
15 to 24 n 20 1 6 , 2 5% of local workers in the Wel l i n g t o n
and E a s t Gippsland Timber Sector were a g e d
betw e e n 4 5 and 54 years.
25 to 34
The s e c t o r had a higher share of worker s a g e d
unde r 3 5 (33%) than the average for the r e g i o n
35 to 44 (30% ) , a n d a lower share aged over 64 ( 2 % ) .
45 to 54
55 to 64
65 and over
0% 10% 20% 30%
Source: ABS Census, 2016
Wellington and East Gippsland I Timber Industry Economic Overview I 11MAPPING ECONOMIC
ACTIVITY
LOCATION OF BUSINESSES, 2019
In 2 0 1 6 , Heyfield had an estimated 248 j o b s i n
the T i m b e r Sector, just under a quarter o f t h e
Well i n g t o n and East Gippsland total. Th e g r e a t e r
Orbo s t a r ea and Yarrum were other key l o c a t i o n s
LOCATION OF EMPLOYMENT, 2016
Source:ABR, 2020
Source: ABS Census, 2016; NIEIR, 2020
12 I Wellington and East Gippsland I Timber Industry Economic OverviewImpact of Native
Logging Ban
03THE DECISION In 2 0 1 9 , t h e Victoria n Government anno u n c e d a p l a n t o phas e o u t logging of native trees by 20 3 0 . Vict o r i a ’ s Forestry P lan saw logging in o l d g r o w t h fore s t s e nd immediately. The policy als o i n c l u d e d redu c i n g the current level of native timb e r a v a i l a b l e f o r logg i n g f rom 2024-25. A competitive pro c e s s w i l l b e used t o a llocate timber from mid-2024 t o 2 0 3 0 , a f t e r whic h c o m mercial native timber harves t i n g i n S t a t e fore s t s i s set to cea se. A$12 0 m i l lion transition package was an n o u n c e d t o help c o m m unities adapt. This is propose d t o i n c l u d e gran t s t o g row and c reate local business e s a n d j o b s , fina n c i a l s upport fo r community projects a n d f u n d i n g for l o c a l i nfrastruct ure. Imme d i a t e financial assistance is being p r o v i d e d t o affe c t e d l o cal busin esses to prepare and p l a n t h e i r resp o n s e to the transition. This includes a s s i s t a n c e t o reto o l i n o rder to sw itch to plantation ti m b e r a s w e l l a s fina n c i a l c ompensat ion. 14 I Wellington and East Gippsland I Timber Industry Economic Overview
SALES/OUTPUT $M VALUE ADDED $M ECONOMIC IMPACTS
2.9% $155 2.9% $50
Direct Direct
Industrial $91 Industrial $32 The e s t i m ated impact for the Wellington a n d
East G i p p sland region if native logging c e a s e d
Consumption $61 Consumption $26 imme d i a t e ly would be substantial.
Total $308 Total $108 It is e s t i m ated that it would result in
appr o x i m a tely 1,110 job losses (527 dir e c t a s
$0
00
00
$0
0
25
well a s a n additional 315 from supply c h a i n
$5
$2
$4
$1
impa c t s a nd 268 from consumption impa c t s )
Outp u t i n the region is estimated to fall b y
JOBS $308 M o n annual ba sis of which $155M i s a
dire c t i m pact.
Direct 527 Valu e A d d ed is estimated to fall by $10 8 M w i t h
Industrial 315 $50M b e i n g direct impacts.
Consumption 268 This is based on the share of Timber Industry reliant on native
forestry inputs and adjusting for share of industry utilising partial
Total 1,110 imported inputs and/or plantation timber. The impacts are based on
2.9% assumption of minimal transition to other replacement supply
sources which stakeholder feedback has suggested is highly unlikely
0
0
0
given current timelines. For more detail of model utilised, refer to
50
25
Appendix.
1,
Source: NIEIR, 2020
Wellington and East Gippsland I Timber Industry Economic Overview I 15IMPACTS BY INDUSTRY
Manufacturing
Agriculture, Forestry and Fishing
AND LOCATION Retail Trade
Professional, Scientific and Technical Services
Transport, Postal and Warehousing
When l o o k ing at the incidence of impact s , i t i s n o t j u s t
loca l w o r kers in forestry and sawmilling t h a t w i l l b e Wholesale Trade
affe c t e d . I n fact, 35 % or 386 local jobs a r e e s t i m a t e d Health Care and Social Assistance
to b e l o s t in industr ies outside of Manu f a c t u r i n g a n d
Agri c u l t u re, Forestry and Fishing. Other Services
Education and Training
In a d d i t i o n , the loca l impacts will have r i p p l e s a c r o s s
indu s t r i e s outside the region. It is estima t e d t h a t t h e Financial and Insurance Services
loss o f e conomic activity in Wellington a n d G i p p s l a n d
Accommodation and Food Services
coul d c o n tribute to additional losses of 3 7 5 j o b s i n t h e
rest o f V i c toria and 196 jobs outside th e s t a t e . Administrative and Support Services
Construction
Rental, Hiring and Real Estate Services
VALUE ADDED $M JOBS
Information Media and Telecommunications
Rest of Victoria
2.9% $37.9 Rest of Victoria
2.9% 375 Arts and Recreation Services
2.9%
Rest of Australia $21.8 Rest of Australia 196 Public Administration and Safety
Electricity, Gas, Water and Waste Services
0
0
0
$0
0
0
Mining
20
40
$2
$4
Source: NIEIR, 2020
0 100 200 300 400 500
Source: NIEIR, 2020
16 I Wellington and East Gippsland I Timber Industry Economic OverviewWIDER IMPACTS
Bann i n g l ogging in native forests has p o t e n t i a l
nega t i v e impacts that extend beyond the l a r g e l o s s o f "the flow down e f f e c t o n s m a l l
loca l j o b s and outpu t. c o m munities wh e n a m a j o r
in d u stry closes i s t h e t o t a l l os s o f
Thes e i n c lude: s o c i al fabric wi t h i n a r e a . W o rk i n g
The l i k e l y increase in import of timber f r o m fa m ilies are aff e c t e d i n m a n y
over s e a s sources that do not meet the s t r i c t w a y s, income l e v e l s d r o p , p e o p l e
sust a i n a b ility practices and certificatio n s m e t b y a r e forced to tr a v e l f u r t h e r t o s h o p
exis t i n g Victorian forestry contractors. a t t he bigger to w n s , s p o r t i n g c l u b s
An i n c r e a se in carbon emissions due to a c l o s e, volunteer o r g a n i s a t i o n s
cons i d e r a ble uplift in 'carbon miles' res u l t i n g f r o m
impo r t i n g timber from interstate or ove r s e a s h a v e reduced c a p a c i t y , s c h o o l
sour c e s . n u m bers decrea s e , m e d i c a l
Loss f o r e stry skills, expertise, knowledg e , a n d s e r v ices dissipa t e , s p o r t i n g cl u b s
equi p m e n t that is often the first respons e t o f i r e g o i nto decline a n d s k i l l e d w or k e r s
even t s m o v e away in p u r s u i t o f w o r k .
Loss o f s pecialised manufacturing skill s t h a t a r e
not e a s i l y transferrable to other industr i e s E m p loyment get s h a r d e r t o f i n d . "
Loss o f a lternative supply if plantation t i m b e r i s
impa c t e d considerably by bushfires W e l l ington Counc i l ’ s E c o n o m i c
D e v e lopment Of f i c e r , M a r k
C o l e man.
Wellington and East Gippsland I Timber Industry Economic Overview I 17SWOT Analysis 03
S W
The local Timber industry has a number of strengths built up over The industry does have some weaknesses that have limited
generations of logging and processing native wood in the region. growth potential (historical and/or current) and flexibility to
adapt.
These include:
These include:
All wood products come from forests that are certified as
meeting sustainable management practices. Certifications are Lack of long term planning by industry stakeholders and
provided by the Programme for the Endorsement of Forest government to manage the future of timber usage in the
Certification (PEFC) schemes and the Forest Stewardship state
Council (FSC). Past practices were unsustainable and cast a poor image
A number of sawmills use high-end manufacturing facilities on the industry still to this day
producing high value bespoke products for the domestic and Some industry players have not seen and utilised true
overseas market. potential of generating high value timber products over
Workforce is technically skilled with specialised expertise in cheaper ones
custom machinery As some workforce are highly specialised, it means access
Sawmills have made regular capital investments in rcent year to skills can be hard. Businesses need to invest
maintaining innovative practices considerable resources in providing their own training.
Woodchips and offcuts are reused within the supply chain and Specialised workforce means industry transfer possibilities
directly feed into Australian Paper operations in Latrobe can be difficult
Native wood contractors and machinery are crucial to fire
management efforts
19 I Wellington and East Gippsland I Timber Industry Economic OverviewO T
Prior to the native logging ban announcement, the local timber The threats to the local industry are numerous and include:
industry had the potential to expand in the future due to a number
of factors. The ban of native logging clearly causes supply issues that
place the whole industry in the region at risk of long term
These include: viability.
Undersupply of timber plantations in Australia which under
Given adequate time to harvest (beyond 2030), high-value federal Government plans were supposed to reach 3 million
sawlog plantations were slowly being invested in and could hectares by 2020, however actual forecasts are
support supply in the industry. They generally represent a approximately 1.9 million hectares in 2021-22.
beneficial land use change from farmland that has become Bushfires pose an ongoing risk to timber supply and
unviable due to ongoing soil erosion. potentially more so in plantations due to density of forests.
Short term growth in housing construction due to lower Imported wood products will rise to meet demand if local
interest rates and government incentives would prop up timber supply constraints are not fixed.
demand and prices. Loss of specialised manufacturing skills that are not easily
Recent changes to the National Construction Code allow a transferrable to other industries
greater range of buildings to utilise fire-protected timber Loss of alternative supply if plantation timber is impacted
construction systems. considerably by bushfires.
Timber could be more heavily encouraged in Australian Climate change will potentially impact water availability
construction. It has lower embodied energy when compared which is crucial for timber plantations growth.
with other building materials and therefore has the potential
to reduce the nation' s carbon footprint.
Closed loop plants using sawmill offcuts to generate clean,
sustainable and cheap bioenergy could reduce industry costs
and improve sustainability.
Gippsland Centre of the National Institute for Forest Products
Innovation to open in late 2021 to support transition to
plantation timber. Source: Talking Timber, 2021; VicASH.com.au, 2020; IbisWorld Industry Reports,, 2020,
Victorian Government, 2020
Wellington and East Gippsland I Timber Industry Economic Overview I 20APPENDIX - DATA AND
METHODOLOGY
This r e p o rt utilises an economic impact m o d e l t h a t i s Econ o m i c impacts related to the ban on n a t i v e
spec i f i c a lly tailored to the Wellington a n d E a s t logg i n g h ave been estimated via isolati n g
Gipp s l a n d economies by using local inpu t - o u t p u t t a b l e s indu s t r i e s impacted and running effecti v e j o b
deve l o p e d by National Economics (NIEI R). loss e s t h rough the economic impact mo d e l t o
iden t i f y f l ow on imp acts.
An i n p u t - output matrix describes how th e d i f f e r e n t
indu s t r i e s in an economy interrelate, and h o w s u p p l y Flow - o n i mpacts in direct industries ha v e b e e n
chai n s o p erate in the local area. Using i n p u t - o u t p u t remo v e d o r discounted in order to preve n t
tabl e s , m ultipliers can be calculated to p r o v i d e a doub l e c o unting.
simp l e m e ans of working out the flow-on e f f e c t s o f a
chan g e i n output in an industry on one or m o r e o f Iden t i f y i n g the likel ihood of any transiti o n p l a n s
impo r t s , i n come, em ployment, or output i n i n d i v i d u a l enab l i n g continued operations (e.g. by
indu s t r i e s or in total. subs t i t u t i n g wood s upply) were out of sc o p e o f
this r e p o r t . Identify ing uplift in other ind u s t r i e s
The e c o n o mic impact model is updated e a c h y e a r t o (pot e n t i a l l y tourism ) due to the ban on n a t i v e
take a c c o unt of changes to the local ec o n o m y . logg i n g w as also out of scope.
Mult i p l i e r s for a reg ion may change over t i m e i n
resp o n s e to changes in the economic and i n d u s t r y
stru c t u r e as well as price changes.
Source: NIEIR, 2020
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