STT's paper profits

 

The discussion about whether to process Tasmanian native timber logs here or in Victoria sidesteps the real issue and once again highlights the widespread misunderstanding of the financial realities of the native forest industry.

Industry defenders usually point to the accounting profits in Sustainable Timber Tasmania’s annual reports as proof that native forest logging is commercially viable.

But almost all the profits come from book entries not from cash. The core issue lies in how STT values its forests - as a single‑rotation horticultural crop. The standing timber is valued at fair value less costs to harvest and sell not including the costs to regenerate. Any increase in the book value is booked as profit. In 2024–25, that revaluation added $7.5 million to STT’s bottom line -- more than the entire reported profit.

But native forests are not a crop. They are perpetual ecosystems that require continuous investment in roads, regeneration, land management and fire protection. These are not optional extras. They are the essential costs of accessing and maintaining the forest. Yet STT’s valuation model excludes them from the net harvest proceeds calculation that’s used to value timber. The result is predictable: trees are overvalued and the reported profit is overstated.

STT discloses every year in a Note buried in its financials that it only values the current crop of standing timber but how is a lay person supposed to know exactly what that means. If it wanted to make it clear to readers it would add a rider “If the forest estate was valued as a perpetual ecosystem and the full cost of roading, regeneration and long‑term ecosystem maintenance included, then the value of the forest estate would be negative requiring a government guarantee for the business to continue as a going concern”.

That’s the only conclusion from the numbers.

The Forestry Corporation of NSW of which STT’s Chair is also a director has fully impaired its native forest assets, implying future operations will be loss making. Fortunately, it has a much larger profitable softwood plantation estate, so solvency isn’t an issue.

Even more significant is the subsidy implied by rent‑free access to public land and its timber. STT does not own the land it harvests. The Crown does. Yet STT pays no rent, no lease fee and no royalty that reflects the true economic value of the resource. In any honest economic model, the land, and the right to harvest the timber, carries an opportunity cost. That cost is zero in STT’s accounts. This omission alone makes native forest timber appear far more valuable than it really is. A private operator would have to buy or lease land, pay holding costs and pay for the timber. STT pays none of these. The public provides the land, the timber and the carrying cost and then STT reports a “profit.”

If an imputed rent were included, as any economist would insist, STT’s native forest operations would be deeply loss‑making. The fact that STT must draw down term deposits to fund operations and relies on a $12 million annual government grant for basic land management, only reinforces the point.

But the environment movement also gets something wrong. Ending native forest logging would not suddenly free up tens of millions of dollars for health and education. Ending native forest logging would stop the losses from the logging itself, and it would eliminate the unpriced environmental costs - carbon emissions, habitat loss, water degradation - that never appear in STT’s accounts. But it would not eliminate the need to manage 821,000 hectares of public land. The fiscal benefit of ending logging is real, but it is not the windfall some imagine. It is the avoidance of ongoing losses, many of which are currently unrecorded, not a new source of cash.

At the heart of the debate is a simple but profound misunderstanding: native forests are not a crop. Treating them as one — valuing only the timber, ignoring the land, ignoring the ecosystem, ignoring the opportunity cost — produces distorted accounts, distorted incentives and distorted public debate. A perpetual native forest ecosystem cannot be valued like a single rotation of radiata pine. It must be valued as a long‑lived public asset with multiple benefits - timber, carbon, water, biodiversity, recreation - and multiple costs. STT’s current model captures only one of those benefits and almost none of the costs.

Tasmania needs a more honest conversation about native forest logging - one grounded in economics, not slogans. The industry is not financially sustainable under its current model. Ending logging will not deliver a budget windfall. And until we stop pretending that a native forest is just a stock of wood, we will keep arguing past each other instead of facing the real question: is the public getting value from this industry, or simply carrying its costs?

(Published in The Mercury 17th July 2026 with the title "Native forest logging is living off paper profits as our timber industry defenders bark up the wrong tree.")