That would secure jobs, create better paying jobs, help Rotorua's growth and create new jobs down the line, he said.
Without Labour's policies, the investment was a possibility "but not a sure thing".
Mr Rigter said the Pro-Wood procurement policy had been "the clincher" for Red Stag chief executive Marty Verry.
Under that policy, those constructing Government-funded buildings up to four storeys high would have to consider using timber.
Mr Cunliffe said the Red Stag investment would be great news for Rotorua.
"A new world-class mill fitted with the latest technology will future-proof jobs in a region hard hit by the National Government's hands-off approach. I am delighted that our policies can secure jobs in a region that desperately needs them."
The growth in raw log exports was concerning, he said.
"It's a crying waste for New Zealand and for our regions which could have more jobs. We could be exporting higher value products than we are.
"In 50 years, do we want to be someone else's raw materials supplier? It's dumb."
Gisborne-based Labour MP Moana Mackey, who accompanied Mr Cunliffe yesterday, said the policy was a "big deal" for provinces.
"There's been no wood strategy in New Zealand, no one thinking about how to get the best value out of logs," she said. "We just ship them off to China where they add value and we buy it back."
Bay of Connections Forestry and Wood Processing Action Group chairman Bryce Heard also welcomed the policy.
"A greater level of local processing in our region will provide a more stable demand and supply chain for industry, forest contractors and their local communities and encourage more investment in safe, productive equipment," he said.
FIRST Union represents 1500 workers in wood processing, and has members at Red Stag. It, too, supported the policy.
"It is a consistent and coherent policy that looks at big-picture issues like raw commodity exports, the exchange rate and investment, while not losing sight of the workers on the ground," general secretary Robert Reid said.
