Image for The Road to Nowhere

It didn’t take long for interstate friends to offer commiserations following Monday’s Q&A.

No wonder you guys are in a mess. Is she really the Premier?

It’s actually not as bad as it appeared, I patiently explain. It’s far worse.

Even if by some miracle the $276 million buys peace for our time then what?

It’s been barely 3 weeks since the Auditor General indicated that Forestry Tasmania will need an equity injection of $200 to $250 million to survive. Where’s that coming from? Why isn’t it discussed at the same time at the peace deal?

Then there’s the downstream investment required. The last FFIC report, for instance, put the cost of an engineered strand lumber plant at $225 million, generating annual direct income of $290 million and using 550,000 tonnes of plantation hardwood each year.

Good idea but where’s the money coming from? Dennis Rogers and the TDB?

Banks are remaining on the sidelines. The FEA restructure deal, a pragmatic solution to the MIS mess where the interests of growers, shareholders and creditors were to merge in one entity looks to have fallen over, so it’s back to the drawing board for FEA’s Voluntary Administrator.

The forest industry couldn’t even organise to buy Triabunna, an integral part, we are forever being told, of the entire forest industry in the South. Even from the backwoods it was pretty obvious that Gunns needed cash in a hurry to pay redundancies and loan commitments so it was no surprise when a cash offer trumped a couple of bumbling bushies.

Perhaps some funds will come from the $120 million earmarked for regional development, despite the scepticism from respected think tanks like the Grattan Institute about the efficacy of such spending in regional areas.

Maybe it hinges on the State’s Economic Development Plan which Ms Giddings keeps threatening to release but never does. Or is Professor West going to develop another Plan, this time to include forestry?

Meanwhile a retired forester hits the airwaves to remind us that FT adds $111 million to Gross State Product each year. At least it did 3 years ago. But so what? Poker machines add twice as much.

Unprofitable negative cash flow businesses still add to GSP, but as I’ve pointed out on other occasion their contributions are of a transient nature and conveniently disguise the fact that assets are gradually being eroded as a result of the continuous losses.

Losses have to be funded somehow. They’re not painless.

All participants in the debate need to get it through their thick heads that FT will not survive in its current form without lots and lots of Government money and it should at the epicentre of the public debate.

Given the Feds have already offered $276 million, and given FT’s track record of using part of the $140 million in TCFA money to fund ordinary operations, it is extremely unlikely that more funds will be forthcoming. You won’t catch Heath Shaw having a bet.

The State Government will have to sort out FT without the help of the Feds. There’ll be no more after the $276 million. Better make sure it’s used effectively.

The Greens haven’t addressed the issue of life after FT. Nor has the Opposition. Peter Gutwein at last year’s GBE scrutiny hearings didn’t ask one probing question about FT’s parlous state after 3 years of reports to that effect by the Auditor General.

Neither the Greens nor the Liberals have given any thought as to how the industry will be funded in the future——from operations, from loans or from equity? And more importantly from whom?

Without understanding the cash flows of the industry any proposal is just a stab in the dark. Public policy makers have failed badly. The peace offering is at best a partial political solution. Under no circumstances will it be sufficient.

The Auditor General had the first draft of his FT report ready over 2 years ago. Had it publicly appeared then, reform of FT may have been possible. But the period since has seen FT’s situation worsen to such an extent that it’s only a matter of time before the life support machine is switched off.

When are we going to hear about life after FT and how it will be funded?

Of course, not until the Strategic Review Stage 1 completes in October 2011?

We’re not talking about a few school closures and a few million dollars. The Auditor General has said up to $250 million may be needed, well beyond the State Government’s means.

Even then there will be no processing industry to take over to add any more value.

No amount of soothing words and calls for leadership from the Premier can hide the fact that she is hopelessly out of her depth, badly advised, fending off the lynch mobs and desperately trying to search for scapegoats.

John Lawrence  was employed as an economist for five years before returning to Tasmania where working life has been spent as an accountant in public practice and an observer and researcher on finance and economic matters at the State level.

A summation of this article is on Crikey HERE

All John Lawrence, including his devastating analyses of Forestry Tasmania, HERE

• As, Lara refuses to budge, industry jobs vanish, and ...

• As, Crean expects a pulp mill victory:

The Federal Regional Development Minister, Simon Crean, has declared the Federal Government has the upper hand in Tasmania’s forestry debate.

The Federal Government will hand over $276 million agreement to help the timber industry make the transition from native forest to plantations.

Spruiking the carbon tax in Queensland, Simon Crean used the Federal Government’s involvement in Tasmania’s forest peace process to argue it is capable of tackling the difficult issues.

“We are winning that debate,” he said.

Mr Crean says the pulp mill conflict is the next issue to take on.

“I think we’ll end up with a pulp mill down in Tasmania because that’s important as a value added commitment to a sustainable resource,” he said.

The Federal package includes $120 million over 15 years for regional development to create new jobs for displaced workers.

$20 million will be paid out this financial year.

• And Bob Brown’s response:

Crean’s pulp mill fiction

Greens Leader Bob Brown says federal minister Simon Crean’s thought bubble about a pulp mill in Tasmania is muddled and wrong.

“If more federal money is earmarked for Gunns’ pulp mill rather than Tasmania’s schools and hospitals there will be a riot. 

“Mr Crean, as Minister for Regional Development, needs to back Tasmania’s small businesses, including farms, which are where many more jobs and local profits can be generated than from a job-poor pulp mill which would export its profits.

• Dr Jacki Schirmer: Tasmanian Forestry - the industry that hit the wall ...

(Presented by Dr Jacki Schirmer on 26 July 2011, Hobart)

Tasmanian’s forest industry is experiencing ongoing change. A period of growth between 2006 and 2010 driven by expansion of hardwood plantations and investment in the processing sector, has been followed by a significant downturn. This downturn has been driven by multiple factors:

• reduced demand for wood and paper products as a result of the Global Financial Crisis (GFC)
• a strong Australian dollar reducing the competitiveness of wood and paper products
• successful campaigns by environmental non-government organisations to reduce demand for native forest woodchips
• reduced investment in new plantations
• closure of older processing facilities that had become uncompetitive.

[Reference: Jacki Schirmer (2010) Tasmania’s Forest Industry: Trends in Forest Industry Employment and Turnover 2006-2010. CRC for Forestry Report ISBN 978-0-9805903-7-1]

Since 2008 a substantial downturn in industry activity has resulted in the shedding of 3500 jobs from the industry [from 6960 people employed in 2008 down to 3158 by May 2011]. Accordingly the number of forest-related businesses has declined from 500 to 372.

Native forest enterprises have suffered the largest declines in their workforce from 3459 in 2008 to 1678 by late 2010; hardwood plantations from 831 to 470 and softwood plantations from 1174 to 810.

All parts of Tasmania have seen declines in forest industry jobs. As a percentage of the total workforce the municipality of Dorset (main town - Scottsdale) has suffered a decline of 11.2% from 2008 to 2011; Glamorgan-Spring Bay - 6.8% decline; Central Highlands - 4.9% decline; Southern Midlands - 4.6% decline and Derwent Valley - 3.5% decline.

The Tasmanian forest industry is undergoing substantial change. The size of the industry has dropped rapidly since 2008 when the downturn began, with employment falling by 50% and 3500 workers losing their jobs. This study shows that while many of these workers are finding new employment or choosing to retire, the downturn in the industry is having a range of negative effects on forest industry businesses and the workers and families that remain dependent on the industry for the livelihoods. These impacts include both financial and psychological impacts.; compounded by the uncertain future of the forest industry.

60% of jobs dependent on hardwood plantations and 42% of jobs dependent on softwood plantations have been lost since 2008, compared to 47% of jobs dependent on native forests.  The types of workers most likely to have lost their jobs are employed in processing of timber products (e.g. sawmilling) and in harvest and haulage contracting; both sectors shed 50% of their employees. The proportion of total jobs lost is highest for nurseries (84%) followed by silvicultural contracting (79%); although there are smaller numbers of workers in these two sectors.

Further job loses to take effect in June and July 2011 will reduce the employment in the processing sector by up to another 20%.

[Reference: Schirmer, J et al (2011) Technical Report 214 - Socio-economic impacts of forest industry change: a baseline study for the Tasmanian forest industry.  CRC Forestry Interim Report, July 2011]

No change to pulp mill permit

What Gunns says:

http://www.gunns.com.au/news/latest-news/latest-news-article/EPA-Tasmania-Approval—-A-Welcome-Step-for-Gunns-Pulp-Mill/407/

http://www.gunns.com.au/Content/uploads/documents/MEDIA%20RELEASE%20-%202011%2007%2029%20-%20EPA%20Tasmania%20approval.pdf