Bob McMahon

If the government really wants to fund the pulp mill, remember I am indulging in a flight of fancy here, then the last resort of scoundrels has to be seriously considered: flog off the family heirlooms. By which I mean power generation, water resources, crown land, airport etc. and slip the money to Gunns in a disguised or brazen manner.

Did I just say ‘airport’? It’s already happening. Hobart airport has just been sold for $350 million even though Treasurer Aird a couple of weeks previously was hoping to get $40 million for it and market analysts after the sale suggested a realistic market value of $85 million. What’s going on here? Rather than me indulging in wild accusations I would encourage the readers and an investigative journalist or two to look into this deal done by the state government, Macquarie Capital and Tasmania’s public sector superannuation fund, the Retirement Benefits Fund.
MY FIRST Meltdown piece ( HERE ), written just before Christmas, appeared on this site in late December 2007. It was meant as a Christmas present, and while the people of Tasmania received the gift a little late, I trust it was appreciated. It’s a new year now and we are well advanced into the summer that changes everything. So much so that my comments before Christmas now appear to be uncharacteristically guarded.

In the wake of the subprime crisis in the USA, the sinking of Northern Rock in Britain (as solid as…) and the Centro collapse in Australia, getting a couple of billion dollars of risk capital, to build a chickenfeed pulp mill for instance, began to seem a little far fetched towards the end of 2007.

Three weeks later it looks like a phantasmagoria, and anyone still holding onto the dream of getting the money to build a pulp mill in a location so unsuitable as to be a bowel-emptyingly hilarious proposition to any sensible investor, other than that rare investor who is hot to throw 2 billion crisp ones into the toilet, should be packing their bags, (or having them packed by a caring minion who knows in which drawer the underpants are kept), for an extended stay in Ward 1E.

You know what I’m saying. Lean times are upon us, and by ‘us’ I mean the world economy, from which Australia may be initially and partially insulated until such time as the commodity demand declines in those countries for which Australia is a client quarry. We have the amazing situation in the USA of the biggest brokerage firm, Merrill Lynch, set to announce a loss of 15 billion dollars, 50% of the bank’s total value, due to loan defaults and Citigroup, the biggest bank in the USA is set to announce a loss of $25 billion. A whole bunch of other banks and lending institutions in the USA and elsewhere are raiding the kids’ piggy banks for a handful of shekels to stave off disaster for another hour or two. And the US Treasury is printing money and shovelling it into the cash-strapped banks like there was no tomorrow and so debasing the currency, that, like in the Germany of the early 1930s the currency may slide so far it ends up being grounded on millet or brussel sprouts.

I’m not making this up but I feel inclined to tone down the dire forecasts coming out of the US (recession, depression, market meltdown) because I know how sensitive this state government and at least one reader (and reactionary commentator) of these columns is to anything that is too grounded in reality.

But the reality is: Gunns can’t get the money. Which provokes the question: if there’s a fall-back position, what is it? How is it possible to raise funds for something for which you cannot raise funds by conventional means? This is where you and I should get really concerned. Let me develop a piece of fiction.

But first it’s important to understand the true nature of this pulp mill proposal. If you think this pulp mill proposal is an example of private enterprise in action, the capitalist system hitting its straps, then it is impossible for you to accompany me down the path I intend to take.

I’m a private enterprise person through and through. But the pulp mill is demonstrably not a shining example of private enterprise. It is a state sponsored, state facilitated project, and one needs to turn the clock back to the old Soviet Union and the Eastern Bloc to be able to recognize the pulp mill proposal for what it really is, and for what Gunns really is, a company reliant upon a variety of government subsidies (i.e. taxpayers’ money) for its existence. From the point of view of the Gunns board of directors the pulp mill is a mechanism for locking in big government subsidies (which already run to about $200 million annually) for the life of the mill, which could be a hundred years.

The public treasury has been plundered by the state and federal governments, due process has been deliberately debauched by the state government, state parliament has allowed itself to be turned into some sort of branch office for the logging industry and Gunns, all to get the pulp mill proposal to this stage.

Is the Tasmanian state government prepared to go further and fund the construction of the mill, now that the world credit crunch has made it nigh impossible for Gunns to get finance. In parenthesis, it is possible that having failed in Sydney, London and New York, Gunns may go with begging bowl to China, but I suspect the price might be so high that the island of Tasmania would be the collateral? That wouldn’t worry Gunns, but it should worry Tasmania.

Drop the pretence and come out of the closet. Admit that what we have in Tasmania is a ‘command economy’ when it comes to the logging industry. For those of us who sweated through the Cold War and can remember Socialism, the Tasmanian parallels are obvious? The Soviet Union sacrificed everything in Central Asia to the growing of cotton and the state and federal governments are doing the same in Tasmania to facilitate the hijacking of this state by the logging/chipping/pulping/plantation industry.

But where’s the money for a pulp mill to come from? There’s apparently nothing spare sloshing around in the coffers. The health system has got one foot in the grave. Public education is really sad. The lack of public housing is a crime against humanity. Infrastructure is ailing. The roads in Vietnam are much better than the roads in Tasmania. The list continues. Money is needed to redress the decline in public services in Tasmania and there doesn’t seem, on the surface, to be a spare $2 billion for a pulp mill.

If the government really wants to fund the pulp mill, remember I am indulging in a flight of fancy here, then the last resort of scoundrels has to be seriously considered: flog off the family heirlooms. By which I mean power generation, water resources, crown land, airport etc. and slip the money to Gunns in a disguised or brazen manner.

Did I just say ‘airport’? It’s already happening. Hobart airport has just been sold for $350 million even though Treasurer Aird a couple of weeks previously was hoping to get $40 million for it and market analysts after the sale suggested a realistic market value of $85 million. What’s going on here? Rather than me indulging in wild accusations I would encourage the readers and an investigative journalist or two to look into this deal done by the state government, Macquarie Capital and Tasmania’s public sector superannuation fund, the Retirement Benefits Fund.

Is this the start? Is my flight of fancy turning into reality? Is this $350 million going to be used to fund the infrastructure for a pulp mill: transport hubs, rail, roads etc? Don’t forget the federal government is spending a shitload of money on the log truck super highway on the East Tamar. How much further will our governments go to fund this pulp mill? All the way?

Be worried, Tasmanians.

Bob McMahon
www.abetteraustralia.com