The Bay of Plenty town of Kawerau is facing an unemployment double whammy, with proposed downsizing at its Norske Skog Tasman paper mill compounding job losses at Psa- stricken kiwifruit orchards.

Norske Skog has said it is consulting with its 290 employees on a proposal to halve the mill's production to 150,000 tonnes per year, in response to falling newsprint demand.

Kawerau Mayor Malcolm Campbell said rumours had suggested job losses could be anywhere from 50 to 100.

"But it's all just hearsay at the moment."

Redundancies would affect the wider region, with many mill workers coming from neighbouring centres such as Whakatane and Rotorua and a cut in capacity at the mill having a trickle-down effect in supporting industries, he said.

"If 50 jobs are lost that could have a downflow of another 150 jobs elsewhere . . . in forestry, trucking and maintenance."

Any job losses would be disappointing, but he would rather the mill remained as a sustainable local business than went under. "We are supporting them and the unions and the employees."

However, the outbreak of kiwifruit disease Psa had been worse for Kawerau and the region than any cutbacks at the mill would be, Campbell said.

"It's a well-known fact that a lot of our people work seasonally in the orchards and that's not happening so much this year."

Work and Income figures released in April show Kawerau, with a population of about 7000, has the highest proportion of people on various welfare benefits in the country at 19 per cent.

Campbell said the town was "plodding along". Its economic development agency was working hard to create jobs, but outside factors were making that difficult.

He understood production of the "G3" kiwifruit variety, which it is hoped will be more resistant to Psa, would ramp up over the next eight years.

Mike Bryant, Work and Income commissioner for social development in Bay of Plenty, said at the end of June 446 people in Kawerau were on the unemployment benefit, down from 488 in March.

Psa tended to affect the number of seasonal jobs available, rather than create job losses, he said.

"Prior to Psa, we usually placed 2000 to 2500 people into seasonal work across the Bay of Plenty during kiwifruit season. During the 2012 kiwifruit season, due to a lower level demand for workers, this number reduced to approximately 1900."

Norske Skog said its project to build a 25 megawatt geothermal power station at the site would not be affected by any decision to reduce production.

- © Fairfax NZ News