Image for The reason we grow trees for wood production

Reader responses to the many articles on TT regarding forestry, highlights to me the sad state of understanding in the community, AND the forest industry, on why we grow and harvest trees for wood production. It doesn’t matter whether they are native forest or plantation, publically or private owned.

The only reason we grow and harvest trees for wood production is ... Money! Profit! Cash!

Yes that’s right! It is a Commercial Activity. Supply and demand, price and cost. Competitive markets.

Economics 101!

It is NOT about imports, it’s not about orang-utans or the rainforests, it’s not about weeds or bushfires, nor “good resource use”, or “good forest management”. Nor is it about supporting inefficient, forest-based industries to provide employment, nor about greenies vs foresters, nor about tax minimisation, nor about winning the next election. Nor is it about State forest agencies making a loss, so that private companies can try and stay in business. All these other excuses and ideas that come up are just so typical of the nanny-brained, woolly-headed, uncommercial Public Service attitude that has killed the forest industry in Australia.

Australia gave up tariffs and industry protection in the 1980’s; except for the forest industry. We no longer mine iron ore to support an Australian steel industry, nor do we farm cattle to support Australian abattoirs. But we do grow trees to support an Australian forest industry. This clause is (still) included in almost all Australian State forest agency’s business plans or associated Acts of Parliament; along with a bunch of other vague and contradictory objectives. Given the dominant position of the State forest agencies as tree growers, the poor old Australian forest industry has never had a chance to grow and prosper.

And as John Lawrence highlighted in his excellent review of the Tasmanian Auditor Generals report on FT finances (WORTH THE WAIT: A look at the Auditor General’s Review of Forestry Tasmania, HERE), the Parliament and the politicians are as much to blame. (I highly recommend you read his article.) As the sole shareholder, their lack of concern and interest in the management and financial performance of these agencies is a key reason we are in this mess. Not to mention their frequent use of the forest industry as a political football during election campaigns. As I say – poor old forest industry. Pity the community.

Because of all this the forest industry in Australia has never been able to demonstrate to investors or the wider community that it is a proper commercial industry. Commercial industries are generally pretty good at responding positively to both commercial pressures, and to social pressures. Those that don’t respond tend to disappear pretty quickly.

When I was doing my forestry degree at ANU 30 years ago we were told that forestry was ALL about the science. Get the science right and all would be well. There was no mention of the business or the politics; and there was one semester of basic economics and that was it. We came away with the firm view that growing trees was a public service, a charity, not a commercial activity. No one believed you could grow trees and make money.

But the bold decision 20 years ago of the New Zealand Government to sell its forestry assets and shut down the native forest industry (in response to the economic reforms of that era), proved that growing trees is very much a profitable, commercial industry. But only if you have the right policies in place.

So can Australia’s State forest agencies be reformed to run on a proper commercial basis and make a decent profit? If not, then we must close them down. These economic/management reforms may be 20 years too late, but forest Consultant Robert Eastment provided a useful insight into the benefits of a stronger commercial focus at the recent Legislative Council enquiry.

“They have moved the supply of logs in Victoria to an auction system. They have logs coming up and if you are a sawmiller and want those logs then you now have to bid for them. There has been significant restructuring of the hardwood sawmilling industry in Victoria. Probably two thirds of the industry has left the industry because they had antiquated sawmills and very poor returns. The people who have remained in the industry of sawmilling hardwood logs in Victoria now are paying upward and above three times what the logs used to be sold for, and in some instance four times as much. They are producing fewer logs AND the Government has a considerably higher revenue stream through that auction system. The sawmillers who have remained in the industry, because they have invested significantly in technology, processing techniques and producing products that markets want, have a higher revenue stream. Some of them have openly said, ‘We’re more profitable now than we were before, yet we’re paying significantly more for our logs. We’ve been driven to restructure our business’. (Legislative Council Government Administration A Committee, Hobart 27/5/11 (Eastment), p. 21)”

Imagine that. Forest industry reform can work. A profitable, commercially focused forest industry. More money for the Government AND more money for the industry. Absolutely incredible! Well almost. Vicforests still aren’t making a profit, but they are in a much better position now than their peers.

Once the forest industry can clearly and openly demonstrate that it is a truly profitable commercial industry; and the politicians can do a proper job as chief shareholders, then perhaps the community may take it seriously.

This article is in very strong support of the above mentioned John Lawrence review of the AGs review of FT performance, as so many people, including many in the forest industry, are of the opinion that we harvest trees for all sorts of strange and bizarre reasons, and the profitability of Government State forest agencies is not important.

Is the financial performance of Forestry Tasmania important? It is absolutely critical!!!

Is the need for wholesale policy, structural and management reform of the forest industry by the Tasmanian government important? Same answer!!!

Will the upcoming FT review by consultants URS and Deloitte be brave enough to outline the way forward for the Government?

We shall wait and see…….