Image for Dr Judith Ajani: The truth about the ‘mollycoddled’ forestry industry

Geraldine Doogue: But first to a bold challenge to one of our public industries. Get off the public purse once and for all. Now it’s a debate we used to have much more in the 1960s and 70s when subsidies and tariffs were the order of the day; the sort of thing Ross Garnaut worries could come back if we’re not careful. However this is a very specific charge against the modern forest industry and it was laid yesterday during a House of Representative inquiry underway at the moment, looking at to put it generally at the industry’s whole viability. In a nutshell the allegation was that without considerable government input the industry could not survive.

An economist who is passionate about her cause, Dr Judith Ajani presented her analyses to the Committee yesterday. She says Australia’s forests and wood-based industries are at a crossroads and which path they travel is totally dependent on which path they - the government - travel. Dr Judith Ajani is an economist at the Fenner School of the Environment and Society at the Australian National University and she joins me now on the line from Canberra. Good morning, Judith.

Judith Ajani: Good morning, Geraldine.

Geraldine Doogue: You’ve looked at many of the areas surrounding the industry - climate change, native forests, the wood industry itself and investment schemes, and we don’t have time to look at them all, but what are your main concerns.

Judith Ajani: The main issue that’s facing the Government is that we have an industry - a forestry industry - that has been through a process of structural change for at least twenty years and is still got some years to go through. And in that change it has moved substantially from using a native forest resource into a plantation resource. So 80% of our sawn timber and wood panels today are produced by plantations, not native forests, and in that process of structural change, which is entirely good and healthy for the industry; it’s much more competitive. It’s entirely good and health for native forests because there’s less logging in native forests, but in that process we also had that industry moving into native forest chip exporting. And now with a significant area of hardwood plantations - chip logs coming on-stream - we’re seeing a very rapid displacement of native forest chip industry and this resource that’s coming on-stream in bucket-loads effectively, is creating the opportunity - an unprecedented opportunity - for Government in Australia to shift virtually all of the wood production now out of native forests and into the plantation area. And of course the challenge here is to actually let that happen and not to find new ways of using native forest wood, which are being proposed also in bucket-loads - in the sense of burning native forests for energy production and pallet production, et cetera. So, the challenge for Government is actually to use this opportunity of the plantation resource to actually drive some fundamental change in the industry, which will go to the heart of removing the conflict and by that, I mean, really aligning our wood production as the industry really is demonstrating it wants to be aligned into the plantation resource, or the agricultural base, and freeing up our native forests essentially to do the job it’s always none best, which is biodiversity conservation and carbon storage.

Geraldine Doogue: Well, when I read your papers yesterday, I almost got the impression there’s a glut - you’re saying there’s a genuine glut, and you can describe that arising because of over-production of plantation schemes. Did I read that correctly?

Judith Ajani: Yes, you read that absolutely correctly, particularly in the hardwood sector. We’ve had through now fifteen or so years of plantation managed investment schemes; these are effectively tax minimisation driven schemes and what we’ve seen is the demand for tax minimisation has run much, much more stronger than the demand for wood chips in Japan in particular, which is our main market. And so we’ve simply over-planted the market. At the same time, and all through that entire period from the mid-1990s, the Japanese demand and consumption of paper had started to flatten off and as we all know more recently Japan’s economy has hit into some very serious problems. And so what we’ve got in Australia is this very, very large plantation chip-log resource and a very flat market and we’ve simply got an over-supply and the over-supply will take, I’m not sure, maybe five or so, maybe a bit longer, years to work through, but we’re seeing some good aspects of that, even though I think it’s been a waste of public funds doing the tax miminisation policy frame, but there are some good aspects of it…

Geraldine Doogue: Could I just interrupt you, because I think a lot of listeners would say: ‘But didn’t they all collapse, by and large? We still have a problem here.’ And you say: ‘Yes’.

Judith Ajani: Yes, they… most of the components of these schemes have collapsed, but the point here is the wood is still in the ground, the trees are still growing; the resource is still there.

Geraldine Doogue: Right

Judith Ajani: All that’s happened is the change of ownership. The way in which this is working through into the industry is that we’ve seen some very large displacement of the native forest chips, particularly in Tasmania and through Gunns, which dominated the play, as this plantation resource has come on-stream. So, today we’re seeing at least half of our chip exports now are plantation-based, the rest are native forest-based. And there’s no reason why it can’t be 100% plantation-based virtually immediately, because of what we see in the resource projections of those hardwood plantations.

Geraldine Doogue: So, you’re saying: (a) we could completely close down the native forest logging and (b) as well, you’re also saying though Government is artificially propping up - I think - the plantation industry.

Could you make that case for us please?

Judith Ajani: Yes. Look, we certainly have the opportunity to close down virtually or to well … yes, to close down virtually all the native forest logging. There are a few areas in the very high specialty [wood] markets, but they’re 2, maybe 3-4% of the native forest log cut, but virtually all of our native forest logging can cease now without us not being able to meet our wood needs. We can meet our existing wood needs with our existing hardwood and softwood plantation estate. And the second part of your question, in terms of, what is the role of Government here? I think that the way you introduced it at the start was absolutely right. And that is that there is no… there is no real role for the Government any more to be planting trees for this industry. It’s a commercially viable industry. If it’s not a commercially viable industry, it shouldn’t be there. But people are arguing, they’ve got great growth prospects et cetera, and they should be prepared to put their money into their plantation establishment themselves without depending any more on Government grants or tax minimisation schemes.

Geraldine Doogue: Well, you say, they’re not bearing… they’re not bearing the proper risk that any decent grower in any other part of the agricultural markets would… would bear.

Judith Ajani: Yes, that’s right. I mean, we see the attractions of the private sector - doing their risk assessment; doing their market analysis and making their judgements about where to make their investments and the benefits of that arrangement, which is how our economy works and we encourage it to work. The benefits of those arrangements have not been enjoyed by the Australian forestry industry, because we’ve had Governments too willing to take the risk and plant the trees, and essentially subsidise the resource for this industry.

Geraldine Doogue:  So, why are they doing this?

Judith Ajani: There has been years and years of lobbying by the plantation industry for Government to take the risk and the burden. And part of that is the heritage of an industry that was born from logging native forest, which was a resource which was always there and it’s taken until now for this industry to actually start to think about, that maybe we have to take responsibility for growing our resource as an agricultural crop.

Geraldine Doogue:  But you’ve been calling for this for a while, and I know you get very frustrated when no-one hears you. I mean, this is not in vogue this idea that Government’s have to accept some of the risk. That’s actually what happened - part of - during the mining resource tax; it’s, it’s not been debated. So, I’m just wonder why to you think this is being hung on to?

Judith Ajani: Well, I think we’ve put a circle around forests and seemed to have separated it from other industries. I mean, the structural changes that have happened in the Australian forest industry from, you know - they have been dramatic from a native forest resource to a plantation resource. As I mentioned, most of the industry is plantation-based. These are structural changes that are no different from any other manufacturing industry, yet government seems to, you know mollycoddle the forestry industry. And I think there’s enormous symbolism around the forestry industry that forestry lobbyists have been very, very good at harnessing.

Geraldine Doogue:  …exploiting… just

Judith Ajani: And I think they’ve also used the employment issue very, very cleverly to frustrate, I think, Government understanding of just what this industry is and what it’s going through.

Geraldine Doogue: Yes, my final question was going to be just that. If you got you’re way would jobs be at stake, or not?

Judith Ajani: Well they’d be no more at stake than what we’ve had in the steel industry or the textiles, clothing & footwear industry. And ultimately in the long term what I’m arguing here is that we should be a plantation-based industry. That’s where the industry is actually heading to. I mean it’s struggled, of course, to get there, but it is getting there. And if we overlay the plantation resource with a processing [industry] policy which we all know has got the wealth and the jobs, and much more in the processing levels than exporting raw materials. Then we have got the potential to have a very vibrant and very prosperous and jobs-rich forestry industry.

Geraldine Doogue:  So, if we used proper price signals. Your point is if we actually did let the market work properly and let people go through business of maturing as an industry, we could create jobs?

Judith Ajani: We could create jobs, although we have to be very honest here, there is still some shake-out to happen in the native forest saw-milling industry, which is jobs intensive, largely because we’ve never let the shake-out happen in a way in which it should have happened over the last twenty or so years. So what’s happened is that ‘the day of reckoning’ has arrived… basically right now, as we are seeing in Tasmania with Gunns and other sawmills throughout Australia. 

Geraldine Doogue: Yes

Judith Ajani: Today ‘the day of reckoning’ has arrived for the native forest industry, and we’ve got a significant job shake-out is still to happen in this industry.

Geraldine Doogue: Alright, thank you very much for speaking to us today.

Judith Ajani: Thank you, Geraldine.

Geraldine Doogue: Judith Ajani, she’s an economist - part of the Fenner School for the Environment and Society at the ANU and making her submissions to the House of Representatives inquiry into the state of the industry. And you might have seen just yesterday there was a supposed ‘peace deal’ between the forestry industry and the environmental groups over 430,000 hectares of public native forest in Tasmania, and it was all sent up to Canberra apparently… but it turned out there were no signatories on the deal. It seems to have been an administrative oversight, so it’s gone back, I gather, to the sources to… It’s virtually signed, so we’re told. We’ll see. Love your thoughts on that too, we very much welcome the thoughts of people, both in Tasmanian and outside.