Friday, 12 April 2013

The Tasmanian Forest Gravy Train

What started as government funding to compensate for native forest areas lost to the Tasmanian timber industry has become a gravy train on a circuit returning regularly to reload before setting forth to deliver more spoils.

The Helsham Agreement between the Tasmanian and Australian governments in 1989 ensured $50 million over 5 years from the Australian Government in return for locking areas in reserves away from chainsaws. The emphasis was on industry restructure and more intensive forest management.

In 1997 the Regional Forests Agreement (RFA) with similar objectives between the same parties saw $110 million flow to Tasmania.

An extension of the RFA in 2005, the Tasmanian Community Forests Agreement (TCFA) resulted in a further $250 million in assistance, mostly from the Australian Government, and more land placed in reserves. Included was $115 million to help develop plantations to replace native timber, and $56 million to contractors, processors and sawmillers to upgrade and adapt to plantations. In 2007 additional amounts were given to the latter to compensate for tax payable on the grants.

Barely 3 years later in 2010/11 contractors received $22 million in Australian Government assistance to exit the industry.

The Inter Governmental Agreement (IGA) signed in August 2012 promised a further $277 million in assistance, since increased to $379 million to entice parliamentary passage of the necessary Bill. Included are amounts for regional development, more compensation for exiting sawmillers and contractors and others affected by the industry downturn, and amounts for management of reserves which will increase by 500,000 hectares.

In 2012 the Tasmanian government promised the State owned Forestry Tasmania $110 million over 4 years, as it was completely insolvent, unable to even meet annual employee costs of $25 million.

Since 1989 that’s $1 billion in direct cash assistance to the Tasmanian forest industry.

·       Almost all (85%) has or will come from the Australian Government.

·       $345 million has or will be paid to Forestry Tasmania. The $235 million portion from the Australian Government used mainly for plantations has added little value.

·       Contractors in receipt of amounts to stay in the industry have subsequently received exit packages.

·       Contractors accepted Australian government funded exit packages yet continued to work in the industry in other States.

·       Contractors received grants to purchase equipment. Certain replaced pieces of equipment were subsequently purchased by other contractors who too received a grant.  Retooling the industry was the ostensible aim but adding up purchases by each grantee overstates the new plant introduced into the industry.

·       The Australian National Audit Office found some grants were given without demonstrating eligibility.

·       About $50 million was paid to Australian Paper, Auspine, ITC Timber, FEA and Gunns shortly before the businesses folded.

The random waste, poor outcomes and lack of direction masquerading as public forest policy over the past five years has been occurring against a backdrop of the total failure of managed investment schemes, where $1 billion has been frittered away in Tasmania to plant 140,000 hectares with limited value hardwoods, now all pleading for new owners.

In addition Forestry Tasmania the dominant player is yet to chart a way forward from its current insolvent model and its costly plantation strategy.

Equity has completely disappeared from all balance sheets, making banks even more reluctant to make loans in such uncertain times.

The industry is out for the count.

The IGA together with the Tasmanian Forest Agreement, an agreed ‘peace’ deal between various interest groups, including representatives of industry, unions and ENGOs culminated in the Tasmanian Forest Agreement Bill which may restore some certainty.

The Bill however is stuck in the State’s Upper House. Bogged down with a relentless stream of amendments the Members forgot where they were up to and the Government Leader was forced to postpone proceedings until mid April.

Since December the Upper House has spent more time considering the Bill than it normally spends in full session for an entire year. More than forty days has been spent discussing an industry comprising less than 2% of the State’s economy and workforce.

Many Tasmanians whilst not completely happy regard the Bill as a way forward. Others from both sides of the debate are keen to return to the barricades to continue the war of attrition.

·       We weren’t consulted say some. True, but true of almost every piece of legislation.

·       Durability is a problem says others. True but another millennium may be required for universal agreement.

·       It is not scientific and doesn’t provide the best conservation outcomes. True too but this point largely promulgated by foresters rings a little hollow for it was they who like the piano player in the brothel who disavowed any knowledge of activities upstairs stood by as the unsustainable woodchipping regime precipitated our current problems, and who also invoked the Nuremberg defence as the State was carpeted with limited use eucalyptus nitens plantations.

·       Not enough wood say some craft workers. In an unbelievable display of chutzpah they argued for price control as well as more supplies of diminishing special timbers.  

The crux of the industry’s problem is profitability.

Native forests are increasingly remote, and the costs of extraction are increasing even faster. The volume of woodchips helped mask an otherwise unprofitable industry. Product mix and pricing needs to change. Forty days talk about a native forest industry by the Upper House and scarcely a mention about profitability and how to achieve is quite a feat.

It’s not really about the industry, it’s about politics. A pious self serving group of Liberal leaning Members are determined to thwart the Bill and may succeed.

To date $130 million of IGA funds have already been received. In Tasmania it’s not uncommon to accept a tied grant then cry “blackmail” when there’s an insistence the preconditions, in this case the passing of the Bill, are met, so there’s an expectation the money will be paid regardless.

The crucial test is not whether the less than perfect Bill passes and provides the beginnings of a framework to help face an uncertain future, rather whether Tasmania can make and implement workable public policy.

The once warring signatories to the Tasmanian Forests Agreement have displayed a level of civility rare in public policy discussions.

To lose that will be a setback as there are far greater budgetary challenges ahead.

The gravy train may not always deliver.
(This article was published in Crikey)

1 comment:

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