Two reports revealing the extent of financial losses from native forest logging in New South Wales raise questions about the economic viability of the industry.
The state government’s forestry corporation “consistently made a loss” by paying contractors more for harvesting and haulage than it earned from delivery of timber to sawmills, a NSW Independent Pricing and Review Tribunal (Ipart) report found.
“[Forestry Corporation of NSW’s] delivery charge does not fully recover its native timber harvesting and haulage costs, including contract and administration costs, and has not done so for at least the last 10 years,” the report said.
The tribunal recommended the state government review the long-term feasibility of native timber harvesting, noting the majority of wood supply agreements were due for renewal in 2028. It also suggested ways to improve cost recovery.
Ipart’s findings followed the release of the state forestry corporation’s 2023-24 annual report, which disclosed a $29m loss for its native hardwood forest division in the past year, and losses totalling $72m since 2020-21.
The corporation’s annual report said poor financial returns were linked to “operational challenges” and external factors such as extreme weather, regulatory changes such as protections for koalas and greater gliders, and legal injunctions by community groups.
Graham Phelan, an economist with Frontier Economics who analysed NSW forestry’s financial status in 2023, said the Ipart report was a timely and valuable contribution in the context of nature policy and forestry reform in NSW which would encourage evidence-based decision-making.
Phelan said public native forestry struggled financially, offering “poor returns to taxpayers at best”. “The government should look at the economic costs and benefits of the native forestry business in NSW and consider whether community welfare is served by continuing this practice.”
Poor financial performance and environmental costs were among a “myriad of reasons” why governments in Victoria and Western Australia had decided to end native timber harvesting in their states, he said.
There were also benefits associated with leaving native forests standing, such as carbon sequestration, erosion control, flood mitigation and tourism, Phelan added. For example, a Victorian government report valued those benefits at up to $12bn, compared with about $89m if harvested for timber and firewood.
Public native forestry was a small segment of the NSW forestry sector, he said, alongside a much larger non-native softwood plantation business that served construction and cardboard markets.
According to Ipart’s report, about 9% of timber harvested in Australia was native hardwood, and NSW was the second-largest producer of native timber logs after Tasmania.
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A forestry corporation spokesperson said the organisation managed nearly 2m hectares of public native forests on behalf of the NSW government, harvesting about 1% annually. Timber revenue “subsidised” management activities such as firefighting, pests, weeds, conservation and road access, which were only partly government funded.
The corporation would undertake Ipart’s recommendations that related to managing prices and costs, the spokesperson said.
Ipart’s review of native timber harvesting and haulage costs from 2019 to 2022 was yet to be published but has been provided to the NSW treasurer, Daniel Mookhey, and was released to the ABC under freedom of information laws.
Guardian Australia has asked the NSW government for a response to Ipart’s findings.
Justin Field from Forest Alliance NSW, a coalition of environmental and conservation groups, said native forestry was a “bad deal for taxpayers”.
Field, formerly a member of the NSW legislative council, said it was astonishing that taxpayers were “literally paying” to cut down forests that sustained koalas and greater gliders and provided clean water for drinking.
“This is just another piece of evidence to show that native forest logging in New South Wales is economically unviable. We know that it’s ecologically unsustainable, and we know that the forestry corporation has been losing money on its hardwood division for the last decade.”
The report provided an opportunity for the state government to end native forest logging and shift towards an industry based on 100% sustainable plantations, he said.
