Conservationists said the debt was further.evidence of a marginal industry unable to survive without massive, hidden subsidies. They said there were too many sawmills processing too much wood, and the industry was in need of restructuring.
In May, a KPMG report commissioned under national competition policy found the 'state was selling its timber at between 30 and 60 per cent below market value. A week later, a new $27.6 million Commonwealth-state industry adjustment and development package was announced.
A spokesman for the Otway Ranges Environment Network, Mr Christopher Tipler, said: "(The debt) is a subsidy that is not available to other people who have claims on the forest and who represent other values -tourism, water and biodiversity. I think it is outrageous.
"It says that in a boom economy, when the building industry has never been more buoyant, when the timber is virtually given away, the industry still can't meet its debts and pay for it. It demonstrates an industry that is fundamentally unviable."
The executive director of the Victorian Association of Forest Industries,
Mr Graeme Gooding, said the
Government had never suffered a bad debt because timber licence agreements
provided for settlement if a company went broke, "so I don't think there
is any particular risk".
Mr Gooding said people were trying to minimise cash outflows while maximising funds invested in new equipment for value-adding. "So obviously, if the Government is willing to carry some debt from sawmillers ... it is to the benefit of the companies. They are paying interest on those late payments, so the Government is making money on the interest from those royalties."
The native forest timber industry is under pressure to develop alternative, value-added markets after largely losing the bulk construction market to plantations, A recent report for the western regional forest agreement indicated that many sawmills were depending on woodchips for cash flow.
The Department of Natural Resources and Environment's chief finance officer, Mr Alan Young, revealed the timber debt in a discussion with The Age about the $18.7 million debt in the department's annual financial report. The former Conservation Minister, Mrs Marie Tehan, had refused to disclose the timber debt, claiming commercial confidentiality. Labor's Minister for the Environment and Conservation, Ms Sherryl Garbutt, could not be contacted for comment.
Mr Young said the forestry division estimated the debt at $4.8 million in preliminary calculations but the final figure was around one-third of the total. He said the actual amount would be made public when the 1998-99 financial statement for commercial forestry was released, probably within 10 days.
All up, trade creditors owed the department $9.68 million. Most of the
rest of the $18.7 million debt was in various outstanding taxes.