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The analysis, by economic and financial consultants Marsden Jacob Associates, found that all states were maintaining competitive practices by logging native forests because it discouraged investment in private plantations and farm forestry. Victoria was the worst offender, followed by New South Wales.
Don Henry, executive director of the Australian Conservation Foundation, which commissioned the analysis, said it proved what conservationists had claimed for years that native forest products could compete with plantation timber only with the help of heavy public subsidies.
He said state forest departments were using taxpayer funds to shield logging and woodchipping enterprises in public forests from commercial competition and, in the process, were retarding development of plantations and farm forestry vital in fighting the nation's salinity battle.
"Rather than penalise plantations by subsidising logging in native forests, we should actually be directing public subsidies the other way to plantation and farm forestry on already damaged landscapes," Mr Henry said.
"And, unlike clearfelling in native forests, subsidies for tackling salinity will provide a demonstrable public benefit and long-term jobs." Dr John Marsden, whose company has also been engaged by Victoria, New South Wales and Western Australia to assess government business enterprises, said the states risked losing Commonwealth competition policy payments worth almost $4 billion if they did not reform their forestry operations.
Copies of the analysis will be sent to the National Competition Council, which is reviewing state policies for the third round of payments due in the next 12 months. A failure to comply with national competition policy can reduce - payments for state budgets. Victoria receives about $180 million a year.
The report will go to the Productivity Commission, the Australian Consumer and Competition Council and the Prime Minister's office.
A spokeswoman for Victorian Conservation and Environment Minister Sherryl Garbutt said an independent review of timber pricing and royalties was already under way as part of the government's commitment to developing a sustainable timber industry and forest management practices.
She said the Finland-based international forestry consultant Jaako Poyry, which was selected to conduct the review, was preparing a discussion paper for public comment.
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