An unsustainable industry
By Pip Hinman
The case for protecting Australia's old growth forests has tended to focus on the permanent ecological devastation caused by the industry. More recently, mounting evidence suggests that Australian forestry is also unsustainable economically. Handouts mean that, as taxpayers, we are paying big companies to destroy the forests that belong to us all.
According to Dr Andrew Dragun, a senior lecturer in law, economics and public policy at La Trobe University, the native forest logging sector in Victoria is profitable only because of state government subsidies to the tune of $50-385 million per year.
In a paper, The Subsidisation of Logging in Victoria, released earlier this month, Dragun, who was once a consultant to the state Department of Conservation and Natural Resources (DCNR), provides some insight into how the Victorian forestry industry covers up its public subsidy by underestimating the costs of logging, defining some expenditures as revenues and by defining reafforestation as new investment instead of maintenance of stock.
The subsidy, Dragun argues, means that the state government spends $2.25 for each dollar of timber royalty it receives, and that each dollar of exports costs more than a dollar to produce. The subsidy makes it profitable for the companies and their customers, but a loss for everyone else.
The primary day-to-day managing authority in Victoria is the DCNR. This body, ostensibly a multi-use management authority, provides licences to companies to exploit timber from state forests (subsequently collecting the royalties) and protects the conservation values while maintaining and managing recreational resources and facilities.
Dragun's research leads him to conclude that the DCNR prioritises some users over others: "Business interests are able to obtain substantial subsidies for their activities for few jobs and little apparent national benefit".
Dragun is also concerned that a decline in the DCNR's budget over the last four years has occurred at the same time as responsibility for plantation activities was shifted to a statutory body.
The total cost of the department's hardwood operations has dropped by about $24 million over the last few years, despite the level of hardwood extraction from native forests in Victoria increasing. According to Dragun, expenditure has declined because the department is employing fewer people and spending less on the environment.
"Overall, there appears to be no justification for a social welfare payment to the logging industry in Victoria", states Dragun, "especially as the industry is evolving from a family based domestic industry to one focusing on woodchipping exports by large multinational companies. Ironically, in the latter setting there appear to be very few benefits flowing into the local community while most of the gain ends up with overseas consumers who receive a very cheap product."
"We may as well just pay the industry the subsidy, leave the forests alone and we'll all be better off", Dragun concluded.