• Crikey: Tasmania’s forestry sector akin to ‘work for the dole’
Andrew Macintosh of ANU and Richard Denniss of The Australia Institute write:
Late last week, the details of an interim agreement between the forestry industry and green groups on the future of Tasmania’s native forests was released, showing the distance between the two parties has narrowed considerably. Both sides now support the creation of additional reserves and a permanent native forest timber production area, and want governments to help the industry through a process of reform.
So close are the parties to a lasting truce that, upon seeing the agreement, the Deputy Premier of Tasmania, Bryan Green, declared Tasmania’s forest wars over.
Throughout the Tasmanian forest agreement process, the media and others have painted the picture of a polarised debate: greenies on one side fighting for the environment, industry on the other side fighting for economic growth and jobs. But there is another side to the tale; those asking why the native forest sector is treated differently to other industries and not subject to the market principles that apply in most other areas.
In the 1990s, the Council of Australian Governments established the National Competition Policy reform process as a way of weaning out inefficient government practices and promoting improved resource allocation outcomes. The process was remarkably successful, helping to improve productivity, increase choice and reduce prices. Somehow these reforms largely eluded the forest sector, which is still run by outmoded state forest agencies.
These agencies pay no rent for the land on which the forests are located, pay no charge for the trees that are cut down, don’t pay for the environmental harm they cause, receive direct monetary subsidies from the federal and state governments, and yet most still manage to lose money.
Forestry Tasmania, which is at the centre of the negotiations in Tasmania, is a case in point. Its financial performance can be summarised with four facts:
• In the last six years it has received $100 million in subsidies from the federal government
• In the last four years it has lost an average of $100 million per year
• It has an unfunded superannuation liability of well over $100 million
• The Tasmanian government has recently promised to prop it up with an additional $100 million subsidy.
By any measure, this entity is not economically viable. Yet the tap of government subsidies continues to run in order to keep Forestry Tasmania and Tasmania’s native forest sector alive.
Typically, these subsidies are justified on the basis of jobs. Roughly 2000 people are employed in growing, managing, harvesting and processing native forest logs in Tasmania and, with the Tasmanian economy in the doldrums, taxpayers are effectively being asked to look upon the handouts as the equivalent of a work for the dole program.
There is nothing wrong with welfare for the needy but the amounts given to the native forest sector are exorbitant. For every worker in the sector, Forestry Tasmania loses around $50,000 a year. And, conservatively, handouts from the federal government alone in the last four years amount to roughly $50,000 per worker. Very few other industries or workers receive this sort of treatment.
The simplest explanation for the mollycoddling of the native forest sector is electoral maths. Under the Australian constitution, Tasmania is guaranteed five seats in the House of Representatives and 12 in the Senate, which gives Tasmanians a disproportionate influence on the outcome of elections. And Tasmanians have been gravely misled about the contribution that the native forest sector makes to the state economy.
In a recent poll conducted by The Australia Institute, Tasmanians were asked to estimate what proportion of the Tasmanian workforce they thought was employed in forestry and logging (growing and harvesting forests) and in the forestry and forest products industry more generally (growing, harvesting, transporting and processing forest products). The average estimates were 19% and 24% respectively. In reality, forestry and logging accounts for roughly 0.5% of employment in Tasmania (around 1000 people), while employment across the entire forestry and forest products industry adds up to a mere 2% of the state total (around 4,500 people out of almost 240,000).
The same distortions were evident in responses to questioning about the contribution of the forestry and forest products industry to economic activity (gross state product). The average estimate was 28%; the reality is around 3%.
These results relate to the entire forest sector: native forest and plantation. Native forests only account for about half of total employment and output in the industry, making it little more than a footnote in the state economic accounts.
Yet the perception is that Tasmania relies on native forestry for its existence, and that without it, the state would collapse. The public has been fooled into believing this by the industry, which relies on public support to back the subsidies it needs to stay afloat.
With the native forest sector haemorrhaging money at record rates due to the high Australian dollar, increased competition and diminished demand, it is time for the federal and state governments to cut the cord on subsidies and allow market forces to restructure the industry. Such cuts will cause temporary unemployment and the government has a role to play in helping those who are adversely affected. But surely the forest industry should now be treated on the same basis as all others?
*Andrew Macintosh is an associate professor at the ANU’s Australian Centre for Environmental Law and Richard Denniss is the executive director of The Australia Institute
Rob Musk, Senior Forest Biometrician at Forestry Tasmania, writes:
Re. “Tasmania’s forestry sector akin to ‘work for the dole'” (yesterday, item 10). Andrew Macintosh and Richard Denniss provide an economic analysis of timber production in Australian native forests devoid of any consideration of the complexities involved in forest management. The article is riddled with errors and yet again, Crikey has missed an opportunity to inform their readers about an important topic.
Macintosh and Denniss hold up Forestry Tasmania as an exemplar of how badly things are going in our forests. In critiquing the financial performance of this agency they seek to perpetuate a number of myths that normally only get an airing in journals less august than Crikey.
The Tasmanian Audit Office notes that in the 16 years to 2011 Forestry Tasmania made $200 million in profit, averaging $12.56 million per annum, returning $139 million in taxes and dividends. It also noted that Tasmania was $111 million per year better off with FT than without it. The report further explains in excruciating detail how the subsidies paid to Forestry Tasmania in compensation for a 27% drop in productive forest area due to increases in reservation have been used to develop plantation resources. In doing so it casts doubt on whether the amounts paid have been sufficient to cover the profit loss or for the costs of plantation management.
So much for the four summarising “facts”.
Forestry Tasmania manages 694 000 hectares for wood production and a further 807 000 hectares for conservation. The royalty payments from the timber produced in the former pay for the conservation in the latter. How much would this reserve system cost taxpayers without timber royalties? According to the DPIWE Annual report 2010, the Parks and Wildlife Service in Tasmania manages a far less accessible land base at an annual cost of $18.60 per hectare.
So if we chose to halt timber production and provide less roads and public amenities our state forests would cost Tasmanians $12.9 million a year up front. Actually the State forest contains many roads and is interspersed with many other tenures. It is more similar to the NSW reserve estate which costs $37 per hectare to manage. So the upfront cost might be closer to $25.7 million per annum.
Andrew and Richard also seem to think that the alternative conservation-only forest is inherently more sustainable. How exactly? Should we look to National Parks as a possible service model? Forestry Tasmania has 360 staff available for fire fighting duties. The Parks and Wildlife Service in Tasmania has 12. Consider what that means on a hot summers day.
• John Lawrence, TT’s finance expert commentator, in Comments: But cherry picking a few sentences out of a 144 page report that is the most damning indictment of a GBE that I have read in the past few years, desperately trying to ‘correct’ claimed errors, shows that some FT insiders, at least, are not only being a little precious but are still living in a world of illusion.
• Peg Putt, Jenny Weber, Miranda Gibson, Ula Majewski: Forest Industry Duplicity Undermines Goodwill
Environment groups are outraged by the revelation reported in The Australian today of double dealing by the Forest Industries Association of Tasmania (FIAT), who are pursuing an alternative arrangement with the Liberal Party to the current forest agreement negotiations. This arrangement would not protect any new forest reserves but lock in logging whilst quashing markets activity and protest actions.
“This bad faith by the forest industry is undermining good will and shows that they are not serious about protecting high conservation value forests in Tasmania – they only want to silence those who are campaigning for our magnificent forests whilst giving loggers a guarantee they can go for broke,” said Jenny Weber of the Huon Valley Environment Centre.
“FIAT and the Liberals cobbling together an alternative deal is threatening the durability of forest outcomes. Our reaction to this duplicity and evident intention to renege on forest protection is that we no longer feel compelled to sit on the sidelines when the forces against forests are as busy as ever and taking people of goodwill for a ride,” said Peg Putt of Markets for Change.
“On one hand we have a call for sawmillers to voluntarily exit the forests and on the other their leading representative, Glenn Britton, is organising to entrench them and rebuff forest protection. It is becoming clear that these individuals are not genuinely committed to a world class reserves outcome, just manoeuvring for advantage,” said Ula Majewski of The Last Stand.
“My reason for continuing my stand in the Observer Tree has unfortunately been reinforced by today’s revelations. Tasmania’s high conservation value forests need urgent protection, and it is concerning that some elements of the industry may be looking to further entrench forest destruction,” said Miranda Gibson of Still Wild Still Threatened, from the Observer Tree.
