Chops and chips hard to swallow for some Libs

14 August 2014

EARLIER this month VicForests, the state government-owned entity that manages logging in the state’s native forests, celebrated its 10th birthday with a party.

On the face of it the foresters had a lot to celebrate. In its first eight years, despite taking in hundreds of millions in revenue, VicForests made a profit of only $12.3 million and it hasn’t paid a dividend to its owners — the taxpayers — since 2007. Lately, however, the business seems to have turned the corner. In the financial year 2012-13 it made a profit of $802,000 on $106.3 million in revenue.

Not great, but a profit is a profit. And according to government sources, when the next annual report is released, we can expect to see a doubling of VicForests profits to about $2 million.

But according to informed government sources, that is the last good news the taxpayers can expect from VicForests for a long time. This year, they say, it will be lucky to break even. And after that it is likely to be all downhill.

The reason is that in May, South East Fibre Exports, which operates out of Eden in southern NSW, announced it would not renew its contract to take product from VicForests when it expires at the end of this year. SEFE currently takes about 200,000 cubic metres of timber from East Gippsland, which it exports as woodchips.

Even with the SEFE contract, the VicForests operation in East Gippsland is said to be losing between $5 million and $6 million a year. When that revenue goes, the losses will skyrocket. But VicForests is refusing to concede it’s curtains for native forest logging in the east of the state.

“The challenge in front of us now is to build a different future for the timber industry in East Gippsland, which continues to provide jobs and economic benefits to the region but may not include export woodchips,” VicForests CEO Robert Green said in May.

Fighting words from Mr Green, but the question needs to be asked, exactly how many jobs are at stake if logging were to cease in the region. According to an internal government document from 2013: “Over the last 10 years in East Gippsland, timber harvesting contractors have declined from over 80 employees working for 25 companies to around 45 employees working for the remaining 12 contractors.”

Of course, in addition to the contractors who extract and haul the stuff, there will be people employed at sawmills — but it’s not exactly Holden, is it?

Turning away from East Gippsland to the profitable bit of VicForests, the Central Highlands, the picture is a little rosier. No one is denying that logging in the Central Highlands is profitable. And, unlike East Gippsland, there are a lot of jobs dependent on it — namely at the Maryvale paper mill, which employees 900 people.

How wedded Australian Paper, which operates Maryvale, is to VicForests’ product is an open question, however. In the past it has been reported the company would like to transition out of native forest timber. But there isn’t enough plantation wood at the moment to replace native wood.

Actually, there probably is enough timber, but it’s in the wrong place — the Green triangle in the state’s far west. The problem is that getting it to the Maryvale mill is too expensive. Were the Government to offer a subsidy to transport plantation product, the company would probably jump at the chance to use it.

How likely are we to see a change in government policy on native forestry before the next election? While there’s no doubt that Agriculture Minister Peter Walsh is a firm friend of VicForests, his views are not shared by a number of Liberals in the Government. The Liberals’ dislike of the organisation is partly environmental and partly economic — that is to say a suspicion of loss-making government enterprises. They can also see that a commitment to ending native forest logging would be handy in Melbourne going into November’s state election.

That will be a space to watch in the next few months.

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