The lifeline handed to fruit processor SPC Ardmona has spared Shepparton's economy from a $650 million black hole, the town's mayor says.
The future of the cannery in Victoria's north was in peril after the Abbott government refused to offer a financial rescue package.
Shepparton mayor Jenny Houlihan said SPC Ardmona's closure would have sucked $650 million from the region's economy, and pushed the unemployment rate to 10 per cent.
"Our unemployment rate is already two per cent above the national average. That would've seen it go up another two per cent," she told AAP.
"We were very fearful when the federal government dropped out on us.
"It would've been particularly hard on growers who were already starting to burn their trees months ago due to a drop-off in fruit going to the cannery.
"Then there's the jobs at the factory, drivers delivering the goods.
"Not only that, it's the money coming in for retail and the service industry.
"Sometimes that's what people can't see."
The Victorian government will contribute $22 million as part of a $100 million co-investment with SPC Ardmona's parent company Coca-Cola Amatil.
Ms Houlihan says the investment won't just protect the existing jobs but could create many more.
"This is not a handout. This is about retooling and refitting the whole factory to allow for modern food processing and new global products," she said.
"This will become a state-of-the-art factory."
Food processing can deliver jobs and growth to the Australian economy if the industry remains unencumbered by unnecessary cost imposts, a lobby group warns.
The Australian Food and Grocery Council (AFGC) welcomed the rescue package, but said the processor's dire situation should serve as a warning.
AFGC chief executive Gary Dawson called on governments to abandon any regulation that adds costs to the industry.
"Food processing can deliver jobs and growth - it should be an area of comparative advantage for Australia - however now is not the time to impose additional costs on industry," he said.
"We call on all governments in Australia to reject any new regulation that adds costs to the manufacturing industry and to move quickly to remove existing unnecessary regulatory costs."
Australian Manufacturing Workers' Union state secretary Steve Dargavel said a boost in SPC sales since the Abbott government declined financial assistance proved Australians value local manufacturing.
"SPC sales increased 47 per cent since the federal government's decision to let the company rot," he said.
"This decision recognises how important this company is to Australians."
