STT’s Accounting Illusion: A response

Tasmania’s debate about native forest logging has always been shaped by numbers—profit figures, asset valuations, operating cash flows, and claims about economic contribution. But numbers only illuminate the truth when the accounting model behind them reflects reality. When the model is flawed, the debate becomes distorted before it even begins.

My  recent Talking Point article argued that the accounting framework used by Sustainable Timber Tasmania (STT) does not reflect the true economics of a perpetual native forest estate. The CEO’s response (pasted below) published in The Mercury on 28^th July 2026 was welcome and constructive, but it did not address the structural issues at the heart of the matter. What follows is a fuller explanation of why the public is still not being given an honest picture of the financial sustainability of native forest logging.

MONA's Forest economics shared vision: Progress or just another motherhood statement

Preamble

The MONA Forest Economics Congress has done something remarkable. After years of careful dialogue, it has produced a Shared Vision that recognises native forests as living, perpetual systems — a statement now signed by conservationists, Palawa leaders, scientists, artists, philanthropists and, importantly, several major industry figures. That alone marks a significant shift in Tasmania’s forest debate. But it also exposes a deep contradiction: while the Shared Vision treats forests as ecosystems we inherit and steward, STT’s financial accounts continue to treat them as single‑rotation timber crops whose “value” rises automatically on paper each year. This briefing note sets out why that contradiction matters, how it shapes public narratives, and why honest accounting must come before any discussion about how much logging — if any — is compatible with the values the Shared Vision expresses.

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.

Native forest logging or carbon credit schemes?

 

Why Ending Native Forest Logging Delivers Far Greater Public Value Than Funding Short‑Term Carbon Schemes

“Why should the Federal Government incentivise foreign companies to buy up agricultural land in Tasmania for carbon credits?” Primary Industries Minister Gavin Pearce asked at a recent media conference, responding to the Clean Energy Finance Corporation’s backing of the reported purchase of the 22,000‑hectare Rushy Lagoon property in the state’s northeast.

Why indeed?

It is a fair question — but it is also a revealing one. Because the Commonwealth has been intervening in markets for years. Sometimes with good results, sometimes with questionable ones, and sometimes with consequences that only become clear long after the policy has been abandoned.

STT: Another year of deceptive profits and economic unviability

 

Sustainable Timber Tasmania's (STT) 24/25 Annual Report attempts to project an image of strategic progress and financial health, proudly declaring "eight years of consecutive profitable results." However, a rigorous, critical examination of the financial statements, viewed through the lens of industry realities and basic economic principles, reveals a far harsher truth: STT's reported profitability is an accounting construct, propped up by non-cash revaluations and heavily reliant on a substantial government grant for unavoidable public land management duties,  and crucially, benefits from the undisclosed, massive subsidy of free access to public land and its timber resource. This deceptive facade of success not only masks a core operation that is economically unviable but also obscures the ongoing accrual of significant, unquantified societal and environmental liabilities that would largely cease if native forest logging operations were to stop.

STT 's bogus sustainability

 

The following contain background notes to assist local groups in their efforts to prevent clear-felling by STT of their favourite bits of remaining Tasmanian native forests.

First there’s a detailed summary of the accounting issues which relate to STT’s approach to valuing its native forests which are shown to underpin STT’s highly questionable claim to being sustainable.

Second there’s a brief note looking at a particular coupe planned for logging in 2026 indicating the likely social losses that will ensue.

 

STT's desecration continues

 

The desecration continues. Another 20 hectares, this time in the iconic Dial Range on Tasmania’s Central Coast has been earmarked for clear-felling by Sustainable Timber Tasmania STT later this year.

Tasmania's forests: The current position

 

CHALLENGES FOR TASMANIAN PUBLIC FOREST MANAGEMENT: THE CURRENT POSITION

This paper was written for the Forest Economics Conference held at Mona from 28^th to 30^th November 2023.

 

CONTENTS

Background

Tasmania’s forests: A snapshot

Sustainable Timber Tasmania (STT): An overview

Issues

Tragedy of the commons

STT: A business, a guardian, or a godfather

STT in transition

Current markets

Information asymmetry

Summary

Forestry facts

Less popular forestry facts

Challenges

 

Vic Forests: The aftermath

 

Vic Forests’ disaster brings to mind the familiar Hemingway quote: “How did you go bankrupt?"

“Two ways. Gradually, then suddenly.”

The 2021/22 bottom line of $54 million was followed by a $61 million loss in 2022/23, according to Vic Forests’ recently tabled Annual Report.

However a close reading of the financials reveals the picture was far worse.

STT admits accounting errors

 

This note is an addendum to the blog STT's forest valuation charade following the release of STT’s Annual Report for 2022/23 on 31^st October 2023.

STT has admitted making errors with its financial statement since 2010. It has restated prior year financials and provided an extensive note.

STT's forest valuation charade

 

Publicly owned commercial native forests as operated by Sustainable Timber Tasmania P/L (STT) are perpetual assets managed for the benefit of future generations.

Yet when STT values its forests every year it values the estate as a single rotation crop. Which is a patently absurd assumption for a perpetual asset where replanting is mandatory.

This is the loophole that allows STT to pretend to be sustainable. Replanting costs are excluded when determining the expected net proceeds which forms the basis for a forest’s value.

STT revisited

 Most people hoped we’d heard and seen the last of them.

But then a bell rang, and out they came, like the travelling troupers from Harry Paulsen’s Touring Stadium.

The forest fighters were back, determined as always to ignore recent events if it didn’t suit their narrative.

The spark that re- ignited the fire was the decision of the Victorian government to halt native forest logging. It was described as a Dan Andrews stuff up, as the actions of an anti-forestry government, but that shows a wilful ignorance of the financial unsustainability of native forest harvesting in general and VicForests in particular, where the final nail in its coffin were the massive 2020 bushfires.

Native forest logging mythology

 

THE fact that trees may regrow does not make native-forest logging industry sustainable.

Dorset Mayor Greg Howard was reported (Mercury, February 2) as slamming people who do not accept his reality that because forests regenerate, forestry is one of the only truly sustainable industries.

It’s a non sequitur that is easily shown to be such by a close examination of Sustainable Timber Tasmania’s financial statements.

Over the past 20 years net contributions by governments to STT have been about $500 million.

Over that period the value of STT’s forest estate has plummeted by 75 per cent.

The latest financials show the estate is worth $186 million.

Despite all the assistance, it still lost most of its value. Ipso facto STT is financially unsustainable. No other conclusion is possible.

If that sounds bad, the reality is worse.

STT’s forest estate is based on expected future net proceeds. That is, future harvest revenue less future expected costs. But STT only values standing timber. The costs of regenerating the forest are ignored.

“All coupes regenerate,” claimed Mr Howard. Maybe, but if regeneration costs are not counted when valuing forests, how can Mr Howard claim they are sustainably managed? This is the fundamental flaw in arguments peddled by the native-forest harvest lobby.

Were regeneration costs included when calculating future expected proceeds, almost all native forests would have a negative value.

Standing timber may have a value. Most native forests don’t, if one includes the mandatory regeneration costs when calculating future net harvest proceeds.

It gets even worse if one attributes a value to all the other non-timber losses that occur when forests are harvested and which bean counters preparing financial statements overlook.

There are habitat, water catchment and carbon losses and, in the case of Blue Derby Mountain Bike Trails, clear spillover costs that affect tourism.

Harvesting trees generates cash, but that does not make it sustainable.

(published in The Mercury 5^th Feb 2022)

STT and the unsustainable sustainability myth

 

Tasmania’s forestry industry is world-class and sustainable “said Resources Minister Barnett when releasing the 2020/21 Annual Report for Sustainable Timbers Tasmania (STT),

There’s a useful rule when trying to assess the financial sustainability of any company: Beware if profits are only achieved with book entries.

That’s certainly the case for STT, our publicly owned forest company. It reported another small profit for the 2020/21 year, the fourth in succession. Without book entries and government grants however it would have been another loss, a pattern that has been occurring for a long time.

Another useful rule says beware if there aren’t underlying cash surpluses from operations. STT claim there are but that’s only because it doesn’t include all relevant ones. Replanting and roading costs are treated as capital outlays. For three of the past six years, including 2020/21 net operating cash including roading and regeneration costs has been negative.

As a general proposition for most businesses operating cash is usually more than book profits. Most of the difference is usually explained by book entries such as depreciation.  If the opposite is occurring, where book profits exceed operating cash as it often does with STT, alarm bells should be sounding.

VicForests heading downhill fast

 It is difficult to understand how VicForests’ can describe its latest loss of $4.7 million as ‘a sound result’.

A closer look at the VicForests’ Annual Report for 2020/21 suggests a different description may be warranted.  Forest revenue of $85 million was similar to the previous year, but after production costs of $70 million the stumpage value of harvested timber was the lowest ever at 17.9 per cent of revenue or $15.3 million, which was scarcely enough to cover roading and regeneration costs of $13.5 million, let alone employee costs of $19 million and overheads of $12 million. A lifeline of $21 million from the Government was needed for VicForests to continue as a going concern.

Native forest logging is not sustainable

 

WHETHER or not we have a native forest industry and on what scale won’t be determined by economic sustainability.

Tassie’s AFL side will be playing away games on Mars before that occurs.

Yet the industry still pretends it is sustainable, judging by Nick Steel from the Tasmanian Forest Products Association (Talking Point, April 10).

In the 20 years of the Regional Forest Agreement (RFA) until 2017, the publicly owned Sustainable Timber Tasmania (STT) incurred cash deficits of $562m, including operating losses plus all the money spent on roads and plantations that failed to increase its assets base and are therefore expenses just like wages. Over the same period the value of native forests fell $752m and it suffered a huge increase in superannuation liabilities, which the government took over in 2017.

These balance sheet losses of $840m made overall losses over a 20-year period $1.3bn.

 

Forestry Tasmania and the RFA

The following was a background paper prepared as part of a series of articles on Regional Forest Agreements  by Gregg Borschmann published by The Guardian. An overview can be found  HERE.
The Guardian asked the Tasmanian minister responsible for forestry a series of questions about the RFA. The questions and the Minister's responses are included at the end of this blog.

The Tasmanian Regional Forest Agreement (RFA) signed in 1997, was supposed to provide a framework for the sustainable management of Tasmania’s forests.

If financial sustainability was the aim, the outcome has been a complete failure. Since 1997 the state-owned Forestry Tasmania (FT) has suffered cash operating losses of $94 million. In simple terms it was selling timber far too cheaply.

But the overall picture is even worse. Capital spending of $368 million on plant and equipment, roads and plantations, most sourced from government funds, failed to add anything to FT’s asset base.  FT’s total operating cash loss over 20 years was therefore $454 million.

That’s just the cash losses.

Not only did new capital spending fail to increase FT’s asset base, there were huge non-cash losses as forests under its trusteeship lost $750 million or 90 per cent of their value.

Forestry Tasmania's demise in detail

Forestry Tasmania’s slide from its peak in 2004 has seen it lose $1 billion. Almost half have been cash losses. The rest have resulted from the loss in value of the trees entrusted to it. FT entered commercial arrangements with customers, particularly major customer Gunns, which effectively forfeited its commercial advantages as a monopoly supplier. As a consequence it fortunes closely tracked those of the industry particularly Gunns, and since the latter’s demise has only survived courtesy of government patronage.

After numerous inquiries, reports and years of procrastination, the government appointed Treasury Secretary to the Board in May 2015 to act as de facto Voluntary Administrator to see if FT could be resuscitated. An interim report was presented to government on 29^th September 2016.His tenure lasted until February 2017, FT was restructured as much as its political masters would allow before being handed back for directors to run under the new name of Sustainable Timbers Tasmania (STT).

The following is a more detailed report on FT’s demise following the period of administration. It covers the events leading to insolvency, the actions taken and the prospects for the future.

CONTENTS

The 2016/17 year

The plantation sale

The superannuation transfer

Overview since 2004

Other assistance to the forest industry

The Ta Ann deception

Insolvency signs

Problems with the current model

The future

Forestry Tasmania's final report

A survey of the wreckage left behind by Forestry Tasmania (FT) reveals since its peak in 2004 it has lost over $1 billion from forestry activities.

 During that time cash outlays were $440 million more than trading revenue and the value of the forest estate fell by over $600 million. Add the two figures together give the aggregate loss over the past 13 years of $1 billion. Equal to $40 for each tonne harvested.

Spending on plantations ($106 million), property and plant ($33 million) and roads ($105 million) added nothing to FT’s asset base. Together with the continual losses from forest harvesting meant FT’s cash losses totalled $440 million over the last 13 years.

Then there are non-cash losses, often called book losses, principally the fall in the value of the forest estate. This has occurred because a lot of trees have been chopped down and sold and because as maintenance and harvest costs rise faster than prices for forest products then the value of remaining forests consequently falls. Over the past 13 years the value of FT’s forests has fallen by over $600 million. Trees entrusted to FT are now worth a fraction of their former value.

So how did FT cover its cash losses?

Forestry Tasmania's insolvency report

Resources Minister Barnett’s recent statement following the release of Forestry Tasmania’s 2015/16 annual report was by no means the first attempt to report on problems in the forest industry.

Another report summed it up pretty well:

“I received from the Hobart Chamber of Commerce a statement on “The hardship suffered by the timber industry in Tasmania,” in which it is stated “For the past few years....... the sawmilling industry has been in a very bad state, until now, with the added effect of the general depression, the position is really desperate.”

“While the Chamber of Commerce of Hobart considers “there is every justification, nay, necessity, for assistance and relief being granted by the Commonwealth to this State,” no useful information is afforded in the shape of any practical proposal for the betterment of the methods of production.”

That’s from a Report of an Inquiry into the Financial Position of Tasmania as Affected by Federation.  Its author was Sir Nicholas Lockyer.

The date of the report? April 1926. 

Here we are ninety years later.

The current government whilst in opposition didn’t appear to realise that the margins on forest sales were still failing to cover overheads, not dissimilar to problems in1926.  For some dumb reason they thought they could grow the industry and reduce the losses, and as a consequence went to an election saying no more handouts. No more budget funding for FT.

When things didn’t work as they told us they would, $30 million was slipped in the back door from Tas Networks on 1st July 2015. That was quickly seen for what it clearly was, viz a less than honest continuation of the same sins condemned when committed by political opponents.

Since then FT has received further cash of $26.5 million from government, the latest amount on 30^th June 2016 being another $4.4 million from Tas Networks, this time for a transmission network at the Southwood plant.

Now Minister Barnett has announced the government will take over FT’s superannuation liability of $158 million. The 2015/16 mill door sales after contractor payments barely provided enough to cover payments to retired foresters of $12.5 million. Only $4.5 million remained to cover remaining cash operating costs of $30 million and capex payments of $8.5 million.

Whether it’s a budget appropriation, a back door injection, an arranged asset transfer or the takeover of a huge liability, it is still a government handout. If it looks and walks like a duck there’s little doubt what it is.