The State Government is hampering competition between native forests and plantations by under-pricing native sawlogs and granting longterm logging licences, according to an independent review. Conservationists have hailed the review - conducted by the accounting firm KPMG under the national competition policy - as further proof that taxpayers are subsidising the native forest timber industry.
The KPMG report found that the market price for sawlogs was between 30 and 60 per cent higher than the price charged by the Department of Natural Resources and Environment. The finding follows the revelation this year that woodchip logs are being sold to sawmills for as little as nine cents a tonne.
The report said the underpricing encouraged timber felling in native forests, "whereas if the true costs of supply were charged, the resources (i.e. forests) may well have been allocated to an alternative use such as tourism, recreation or conservation".
It expressed concern that two thirds of the forests set aside for timber
felling are committed under 15-year "evergreen" licences that are rolled
over every five years.
"If long-term licences ... are not subject to any form of open, market-based
renewal, there will be an effective barrier to entry to new players wishing
to enter the industry," the report said.
The report warned that there was no commercial sense in having a minimum level of supply regardless of demand as this could depress prices in the longer term. It said the department's sustainable yield levels should be set only at a maximum. The report also raised concerns about the potential for a conflict of interest interest when the department responsible for commercially managing forests is also responsible for conservation and recreation in forest areas. It called for legislation to provide guidance on balancing these roles.
The Government last week announced it would set up a separate commercial entity in the department called Forestry Victoria. It made no commitments on the other recommendations. It said market-based pricing and the allocation of logs would need to be introduced gradually to avoid massive disruption to existing industries".
Mr Jon Richards, a spokesman for the Conservation Minister, Mrs Marie Tehan, said Forestry Victoria was not moving towards privatisatian. He denied claims of taxpayer subsidies, saying the Government made a profit on native forests. "We don't think we were selling too cheaply, but now we want to ensure we are getting an even better price for it," Mr Richards said.
Environment Victoria's forests campaigner, Dr Rod Anderson, said the report was a scathing indictment of the department, which he said was using taxpayers' money to subsidise timber prices. "And incredibly it has rejected KPMG's recommendation that the Forest Act should have some clear objectives," Dr Anderson said. "It means they can set their own objectives and do what they like, which is what they have been doing. The public gets very little value for this."
He warned that the creation of Forestry Victoria coincided with moves to use more plantation-style management in native forests. "They want to increase the book value of forests so they will be ripe for privatisation and corporatisation at the stroke of a pen, like the Victorian Plantation Corporation."
An economic consultant reviewing the federal-state regional forests
agreements for the Australian Conservation Foundation, Mr Francis Grey,
said the creation of Forestry Victoria would not improve the department's
accountability. Without a licence to operate, Forestry Victoria would
be free, within the department's vague guidelines, to intensify production
in selected forests, he said.