Josh Gordon
The age of entitlement is alive and well in Victoria. At least when it comes to the logging of native forests, a proposition that has become so financially fraught the government is considering getting into the business of firewood collection and chipboard production just to prop it up.
A couple of weeks ago South East Fibre Exports – the Japanese-owned company that owns a large woodchip mill at Eden – decided to dump a contract taking waste timber from VicForests’ East Gippsland logging operations.
It was seen as a body blow for the industry. As it is, harvesting sawlogs from native forests is barely viable, with international markets increasingly demanding cheaper and higher-quality plantation timber, and wood also increasingly sourced from low-cost countries, such as Vietnam. Australia's high dollar hasn't helped.
Even before the decision by South East Fibre Exports, the local sawlog industry was in strife. A December 2013 report by Victoria’s auditor-general found that last financial year at least 250,000 cubic metres of residual wood – 16 per cent of the total harvest – was left on the forest floor and burnt because no one wanted to buy it.
"It is not sold primarily because there is currently no market for it," the auditor said.
What a waste. There may no longer be a market for Victoria's "residual" native timber, but selling this unwanted byproduct is still seen as vital to make sawlogging viable.
Under the current arrangement with South East Fibre Exports – which will end next year – VicForests supplies about 200,000 cubic metres of wood to the Eden mill, equivalent to about one-sixth of the total 1.2 million cubic metres produced by VicForests in 2012-13.
The situation is so dire that VicForests is now considering the possibility of selling the residual wood from its forestry operations as firewood, producing chipboard, or using old-growth waste wood for power generation.
"There is the opportunity for local bio-energy production, but also simple markets, particularly given the increase in energy costs, [like] domestic firewood for home use," VicForests corporate affair's director Nathan Trushell told Gippsland ABC radio.
You can only wonder how a private sector firewood business might feel about the prospect of a heavily subsidised state-owned behemoth encroaching on its businesses.
Indeed, as far as socialist-style, publicly owned businesses go, VicForests is in a league of its own.
Not only has VicForests been gifted a hugely valuable public asset free of charge, it has been given monopoly rights to chop this asset down, all the while being spared massive direct and indirect costs associated with logging operations.
It is enough to make Fidel Castro blush.
These indirect costs include the $20 million annual cost of maintaining forestry roads, the opportunity cost of the water lost from our catchments, plus intangible costs such as lost biodiversity and reduced public amenity.
What does the public get in return for this bold experiment in socialism? According to an assessment of VicForests’ finances by the Australian Conservation Foundation, since 2005, VicForests has accrued operating cash flow losses of $11.9 million on its core forestry activities. Over the same period, it has notched up investment losses worth $10.2 million.
That’s a combined loss of $22.1 million from forestry activities – equivalent to about $1.50 for every square metre of timber harvested so far. As the report notes, VicForests' financial position has to a significant extent been propped up by reliance on cheap debt from the Treasury Corporation of Victoria.
In the nine annual reports since it was established, VicForests has announced just three dividend payments to taxpayers: $3 million in 2006 and $2 million in 2007 and a further $250,000 payment this financial year after a positive profit in 2012-13.
The big argument in favour of protecting the local industry is employment. As the auditor pointed out late last year, the timber industry employs more than 21,000 people, while VicForests claims native forest timber harvesting in eastern Victoria has generated about $1 billion in direct economic benefits since 2004.
Agriculture Minister Peter Walsh insists the market is "fundamentally sound" for high-quality sawlogs, claiming the challenge is to find alternative options for the residual and low-grade timber.
But at what cost? There are very real questions that need to be tackled about whether we can continue to push public resources into an industry that would surely struggle to survive on its own – particularly in an age where the public is told the age of handouts is over.
If the objective is to protect jobs, surely there are more sensible ways to do this. If the government is determined to protect Victoria’s timber industry, investing in economically viable plantation forestry might be a good start.
Already there are rumblings within Coalition ranks about the future viability of VicForests, with the issue seen as a potential pressure point between the the Liberal and National parties.
Given the predicament facing VicForests, it is not hard to see why. The debate is no longer one of ideology, it is one of basic economics.
The Age, May 29, 2014
The age of entitlement is alive and well in Victoria. At least when it comes to the logging of native forests, a proposition that has become so financially fraught the government is considering getting into the business of firewood collection and chipboard production just to prop it up.
A couple of weeks ago South East Fibre Exports – the Japanese-owned company that owns a large woodchip mill at Eden – decided to dump a contract taking waste timber from VicForests’ East Gippsland logging operations.
It was seen as a body blow for the industry. As it is, harvesting sawlogs from native forests is barely viable, with international markets increasingly demanding cheaper and higher-quality plantation timber, and wood also increasingly sourced from low-cost countries, such as Vietnam. Australia's high dollar hasn't helped.
Even before the decision by South East Fibre Exports, the local sawlog industry was in strife. A December 2013 report by Victoria’s auditor-general found that last financial year at least 250,000 cubic metres of residual wood – 16 per cent of the total harvest – was left on the forest floor and burnt because no one wanted to buy it.
"It is not sold primarily because there is currently no market for it," the auditor said.
What a waste. There may no longer be a market for Victoria's "residual" native timber, but selling this unwanted byproduct is still seen as vital to make sawlogging viable.
Under the current arrangement with South East Fibre Exports – which will end next year – VicForests supplies about 200,000 cubic metres of wood to the Eden mill, equivalent to about one-sixth of the total 1.2 million cubic metres produced by VicForests in 2012-13.
The situation is so dire that VicForests is now considering the possibility of selling the residual wood from its forestry operations as firewood, producing chipboard, or using old-growth waste wood for power generation.
"There is the opportunity for local bio-energy production, but also simple markets, particularly given the increase in energy costs, [like] domestic firewood for home use," VicForests corporate affair's director Nathan Trushell told Gippsland ABC radio.
You can only wonder how a private sector firewood business might feel about the prospect of a heavily subsidised state-owned behemoth encroaching on its businesses.
Indeed, as far as socialist-style, publicly owned businesses go, VicForests is in a league of its own.
Not only has VicForests been gifted a hugely valuable public asset free of charge, it has been given monopoly rights to chop this asset down, all the while being spared massive direct and indirect costs associated with logging operations.
It is enough to make Fidel Castro blush.
These indirect costs include the $20 million annual cost of maintaining forestry roads, the opportunity cost of the water lost from our catchments, plus intangible costs such as lost biodiversity and reduced public amenity.
What does the public get in return for this bold experiment in socialism? According to an assessment of VicForests’ finances by the Australian Conservation Foundation, since 2005, VicForests has accrued operating cash flow losses of $11.9 million on its core forestry activities. Over the same period, it has notched up investment losses worth $10.2 million.
That’s a combined loss of $22.1 million from forestry activities – equivalent to about $1.50 for every square metre of timber harvested so far. As the report notes, VicForests' financial position has to a significant extent been propped up by reliance on cheap debt from the Treasury Corporation of Victoria.
In the nine annual reports since it was established, VicForests has announced just three dividend payments to taxpayers: $3 million in 2006 and $2 million in 2007 and a further $250,000 payment this financial year after a positive profit in 2012-13.
The big argument in favour of protecting the local industry is employment. As the auditor pointed out late last year, the timber industry employs more than 21,000 people, while VicForests claims native forest timber harvesting in eastern Victoria has generated about $1 billion in direct economic benefits since 2004.
Agriculture Minister Peter Walsh insists the market is "fundamentally sound" for high-quality sawlogs, claiming the challenge is to find alternative options for the residual and low-grade timber.
But at what cost? There are very real questions that need to be tackled about whether we can continue to push public resources into an industry that would surely struggle to survive on its own – particularly in an age where the public is told the age of handouts is over.
If the objective is to protect jobs, surely there are more sensible ways to do this. If the government is determined to protect Victoria’s timber industry, investing in economically viable plantation forestry might be a good start.
Already there are rumblings within Coalition ranks about the future viability of VicForests, with the issue seen as a potential pressure point between the the Liberal and National parties.
Given the predicament facing VicForests, it is not hard to see why. The debate is no longer one of ideology, it is one of basic economics.
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