AUSTRALIA (From ABC Local) -- The Shoalhaven Paper Mill on the New South Wales South Coast is set to close this year with the loss of 75 jobs.

Australian Paper informed workers of their decision to close the Bomaderry plant on Tuesday afternoon.

Company spokesman Craig Dunn said the company had been suffering financial losses over several years, due to a significant and sustained drop in demand for its security grade paper.

"We've really left no stone unturned and we've certainly looked at costs all of our inputs and also tried to look at new market positions and opportunities for the plant but we've really reached the end of that process now," Mr Dunn said.

"The markets have just become too small for the operation to continue."

The mill has been at the center of a campaign for the Australian government to purchase more of its high quality product for use in passports and identity documents.

Secretary of the Pulp and Paper Division with the Construction, Forestry, Mining and Energy Union Alex Millar, said he's disappointed the government didn't do more to support the local operation.

"60 to 70 per cent of all paper that is used in Australia is through imports, when we're ideally placed to have a solid pulp and paper manufacturing base," Millar said.

"Yet we continue to see the government settings around regulations and procurement and those sort of things really place pressures on the local market and favour the imports."

The closure of the plant is likely to see the production of paper used in the manufacture of Australian passports, sent offshore.

Millar said producing the paper overseas presents concerns for national security.

"I think there must be concern about the security given that some of the paper is for Australian Passports. So you'd always have security issues I think for overseas companies producing that type of paper for the Australian government."

Shoalhaven Mayor Joanna Gash said she was devastated by the decision, although it didn't come as a surprise.

"Over the 17 years I was in politics, I grew up with the paper mill. It was part of everybody's life. It had close on 300 workers," Councillor Gash said.

She said it was a blow the region didn't need, particularly given the Shoalhaven's already high unemployment.

Australia Paper said workers will be paid their full entitlements and job losses will be staggered over the remainder of the year.