Election 2024 : Budget sustainability

With five weeks of election campaigning to spread the message, this blog site will assist by posting regular vignettes looking at problems ahead and drilling down into some of the claims made by politicians vying for our vote.

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.

Macquarie Point Stadium: Gold Mine or Fools Gold?

(Co-written with Graeme Wells, Adjunct Senior Researcher at the University of Tasmania).

The public discussion re the proposed AFL stadium at Macquarie Point has become a bit of a shouting match where the pro and cons of an AFL side and the manoeuvrings of politicians and AFL managers have taken centre stage.

In our view it is important we don’t lose sight of the fundamentals which must underpin sensible public policy. It is for this reason we have chosen to comment on a recent study given prominence in the media which essentially ridiculed expert reports about the economic case for the stadium.

Mr Hanson’s recent contribution to the economic case for the proposed AFL stadium has received extensive coverage in the Mercury. It has been described as uncovering a gold mine for Tasmania. He claims to identify deficiencies in the expert analysis provided to the government. Unfortunately, his creative adjustments to the government business case, which included a benefit cost analysis (BCA), are misleading and based on a misunderstanding of BCAs. This article is intended to correct the record.

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.

Hydro & Aurora Energy: Onerous contracts

 

Power Purchase Agreements have been used to assist developers of renewable energy projects. These notes explain how Hydro Tasmania and Aurora Energy account for these agreements and how accounting standards allow much of the relevant detail to escape the reporting net.

Included also is a closer look at how Hydro’s sale of a majority share in its windfarms was only possible due to a generous Power Purchase Agreement by Hydro effectively guaranteeing to pay the purchaser’s debt over the term of the agreement.

Finally there’s a note outlining how the assumption of sunk costs are used by renewable energy promoters to give a rosy view of individual projects. For instance, a windfarm developer needn’t consider the costs of Marinus because it’s a sunk cost however large.  A recent article is cited describing how sunk cost trickery understates the costs of renewable energy projects.