The timber industry provides a vital source of income for regional Australia, as well as being a critical supplier to the building and construction sector. In many communities it remains one of the key industries, generating much needed employment and revenue. Notwithstanding its importance, the gradual decline in the extent of the plantation estate in recent decades has placed domestic timber supply chains under some strain. Naturally, this is cause for concern.
Plantations can take up to 30 years to mature and therefore require long-term investment. Business decisions made today will affect the industry for decades to come. As more and more land is removed from the plantation estate, domestic processors will face ongoing difficulties in securing local timber supply to meet ever increasing demand for product. The recent devastation of the Black Summer Bushfires has demonstrated just how fragile these supply chains can be.
The committee acknowledges that reversing the decline in the plantation estate has been a goal of government for many years, both at the federal and state and territory level. It must be noted, however, that to date these policies have had limited success. Though the committee welcomes the Australian Government’s plan to grow a billion new trees within a decade, it has not yet resulted in a tangible expansion of the plantation estate.
It is anticipated that plans to introduce a concessional loan scheme for the establishment of new timber plantations will improve the viability of potential projects and help to drive future investment. The committee, therefore, urges the Government to proceed with this scheme for the betterment of the estate.
Similarly, the Committee also welcomes the establishment of nine Regional Forestry Hubs across Australia. These will ensure that new plantations are located where they can be economically harvested and thus avoid the shortcomings of the previous managed investment schemes. The committee has heard calls from industry for the establishment of two additional hubs in the Northern Territory and south east New South Wales. It recommends that the hub model be extended to these locations.
Notwithstanding the positive steps taken by governments to strengthen domestic supply chains, it is clear more needs to be done if the timber industry in Australia is to flourish into the future. Fortunately, opportunities abound for meaningful change in the sector which will benefit processors and producers alike. The committee took evidence from industry experts and key stakeholders who made plain that many present challenges can be met with sound solutions.
From greater investment in Australia’s forestry research and development capabilities, farm forestry, and the exciting new possibilities presented by carbon storage initiatives, the industry is ripe for innovation and growth. With the appropriate policy settings, the plantation industry may once again have the potential to expand.
Australia is a net timber importer, importing timber valued at nearly $6 billion and exporting timber valued at nearly $4 billion. While no inquiry participants suggested Australia dispense with export markets, the size of the figures involved gives a sense of the growth opportunities available to the processing sector if they could access the supply they need to support investment and drive growth.
The issues surrounding a perceived lack of transparency in respect to softwood pricing are illustrative of the current challenges experienced by the industry which could be remedied by appropriate action. The committee was pleased to hear from producers that they aim to prioritise domestic processing wherever possible. Processors have stressed that they are willing to pay a fair price, if only they could determine one. They made clear they do not want to be subsidised by local producers. However, one key difficulty facing processors is their apparent inability to accurately ascertain export prices for the timber they are seeking to purchase.
Inquiry participants suggested that a solution to this problem lies in the development of a voluntary code of conduct for the timber industry to facilitate long-term timber supply contracts between producers and processors for the mutual benefit of both. It is anticipated that such an arrangement would better support the growth of an efficient domestic processing sector, while reducing the risks to plantation owners inherent in relying on export markets.
The committee believes it is not the role of government to be involved in contract negotiations unless there is clear evidence of market failure. It maintains that such a code should be generated by the industry itself but that stakeholders should be supported by the Australian Government in this endeavour. The code could operate for two years before being reviewed by the Australian Competition and Consumer Commission to assess its effectiveness.
Sensible solutions such as this should go a long way to overcoming the complex challenges which have hindered the domestic timber industry for so long. From the evidence gathered by the committee over the course of the inquiry, there is no doubt that the Australian timber industry can grow once again, and indeed thrive.
Rick Wilson MP
Chair