Introduction
1.1
The forest products sector generates approximately $24 billion per year for the Australian economy and plays a significant role in driving the economy in a number of regional areas.
1.2
The size of the Australian plantation estate has, however, been gradually but consistently declining for over a decade. If this decline is not arrested it could threaten the future viability of the timber processing sector; an industry that relies on certainty of supply to recoup the significant investments in machinery needed to setup a mill.
1.3
This chapter will provide background context on the scale and economic impact of the plantation industry, while later chapters will discuss in greater detail the issues surrounding the timber market and barriers to plantation growth.
Structure of the Report
1.4
This chapter will provide an outline of the Australian plantation industry and a brief description of relevant government policies.
1.5
Chapter 2 will outline the impacts of the 2019-20 bushfires which destroyed large areas of plantation stock.
1.6
Chapter 3 will deal with the dynamics of the timber market, particularly issues surrounding the likely future demand for timber, the export market, the ability of domestic processors to access a reliable supply of timber, and contracts between growers and processors.
1.7
Chapter 4 will address the barriers to plantation expansion and how these can be addressed, the potential for small-scale plantations to be situated on farms, and the potential role of the carbon market in driving growth in the plantation sector.
Inquiry Conduct
1.8
On 26 September 2019, the Committee received a referral to undertake an inquiry into constraints in the timber supply chain from Senator the Hon Jonathon Duniam, Assistant Minister for Forestry and Fisheries. At this time, the Committee had commenced its inquiry into growing Australian agriculture to $100 billion by 2030, which was anticipated to be a large inquiry requiring the majority of the Committee’s time and resources. Given this, the Committee decided to temporarily postpone commencing the inquiry into constraints in the timber supply chain.
1.9
On 11 June 2020, the Committee adopted the terms of reference and commenced the inquiry. The terms of reference of the inquiry can be found at Appendix A. The Committee called for submissions to the inquiry to be lodged by 2 October 2020. The Committee received 31 submissions and 4 supplementary submissions; these are listed in Appendix B.
1.10
Due to the impact of the Covid-19 pandemic the Committee’s ability to travel for the inquiry was significantly restricted. Despite this, the Committee was able to travel to Tumut, NSW on 23 October 2020. While in Tumut, the Committee held a public hearing, toured the AKD Softwoods (AKD) processing plant, and toured bushfire affected plantations with the assistance of the Australian Forest Products Association (AFPA). In addition to the Tumut public hearing the Committee held four public hearings in Canberra; these are listed in Appendix C.
Australia’s Plantation Estate
1.11
Forests cover 134 million hectares, or approximately 17 per cent, of the Australian landmass. The vast majority of this area is native forests, with commercial plantations covering an area of 1.93 million hectares.
1.12
The majority of the plantation estate (76 per cent) is privately owned, with public plantations making up 21 per cent of the estate and the remaining 3.7 per cent of the estate comprising joint public-private projects.
Plantation Rates
1.13
The overall size of the Australian plantation estate is affected by the rate at which recently harvested plantation sites are replanted; the rate at which new plantations in areas not previously planted are established; and the rate of plantation removal, which refers to harvested plantations being transferred to another land-use.
1.14
In 2018-19, 58,800 hectares of plantation, approximately 3 per cent of the total estate, were replanted. The areas of softwood and hardwood replanting were roughly proportional to their share of the overall estate.
1.15
The current rate of plantations being established on land that has not previously been used for plantations is very low by historical standards. In 2018-19, 2,800 hectares of new plantations were established, virtually all of this area being softwood plantations. This rate of new plantings equates to not much more than 0.1 per cent of the existing planation estate. While the majority of plantations are privately owned, the establishment of new plantations was predominantly (92 per cent) undertaken by public owners.
1.16
The rate of new plantations being established has remained relatively constant in recent years, with rates below 5,000 hectares per year since 2011‑12. This contrasts significantly with the planting rates in the 1990s and early 2000s. For example, in 2006-07, the year the current decline began, 86,600 hectares of new plantations were established.
1.17
In 2018-19, 12,100 hectares of the plantation estate was converted to another land use, hardwood plantations accounted for virtually all of the area removed from the estate and the majority (52 per cent) of this area was in South Australia.
1.18
The impact of this decline on domestic processors is discussed in Chapter 3, while the reasons for the lack of growth in the planation estate and how this can be addressed in outlined in Chapter 4.
Softwood Plantations
1.19
Softwood plantations are predominantly located in New South Wales (29 per cent), Victoria (22 per cent) and Queensland (19 per cent). Radiata pine comprises 75 per cent of the softwood estate, with the Murray Valley and the Green Triangle being the primary growing areas. The other major species grown are southern pines (15 per cent), which are primarily grown in Queensland.
1.20
Softwood plantations are overwhelmingly managed (97 per cent) for the production of sawlogs which are used in products for the building and construction industries. Softwood thinnings are often pulped to ‘produce engineered wood products, landscaping products, and paper’.
Hardwood Plantations
1.21
Hardwood plantations are primarily located in Western Australia (28 per cent), Tasmania (26 per cent) and Victoria (22 per cent). The two main species grown are Tasmanian blue gum (in Western Australia and the Green Triangle) and shining gum (in Tasmania). The majority (82 per cent) of hardwood plantations are used to produce pulplogs for woodchips. The remaining 18 per cent of production is accounted for by sawlogs.
1.22
In 2018-19, there was a total of 884,000 hectares of hardwood plantation in Australia. Since 2008-09, the hardwood plantation estate has been gradually but consistently declining and is now 11 per cent smaller than it was a decade ago. The majority of the decline has occurred in Western Australia (61,800 hectares), Queensland (28,800 hectares), and South Australia (20,200 hectares).
1.23
The Australian Bureau of Agricultural and Resource Economics (ABARES) noted that the decline had occurred following the ‘collapse of major managed investment scheme operators in 2008-09’. In addition, ABARES reported that:
The ongoing reduction in area reflects plantation growers and managers’ decisions to return relatively unproductive plantation land to agriculture or to lessors on the expiration of hardwood plantation lease agreements.
Economic Impact of the Timber Industry
1.24
The Australian forest products industry has an annual turnover of approximately $24 billion and ‘contributes around 0.5 per cent to Australia’s gross domestic product and 6.6 per cent of manufacturing output’.
1.25
The Australian Bureau of Statistics estimated that in 2017-18 there were 76,200 people employed in the forestry and forest products manufacturing sectors (see Table 1.1).
Table 1.1: Employment in Forestry and Forest Products Manufacturing (2017‑18)
|
|
|
|
Forestry, logging and support services
|
11,000
|
|
Sawmilling and timber dressing
|
11,400
|
|
Other wood product manufacturing
|
39,100
|
|
Pulp, paper, and paperboard
|
4,300
|
|
Converted paper products
|
6,400
|
|
Other pulp, paper, and converted paper
|
4,000
|
|
Total
|
76,200
|
Source: ABS, 2019, Labour Force Survey, citied in ABARES, Australian Forests at a Glance 2019, p.57.
1.26
AFPA estimated that, in addition to direct employment, approximately 100,000 people are indirectly supported by the economic activity of the timber industry.ABARES also commented on the significant economic contribution from indirect flow-on employment but noted that there was no method of developing a robust estimate of the scale of indirect employment.
1.27
The economic impact of the timber industry is particularly significant in a number of regional areas. In terms of employment, the Green Triangle region of South Australia and Victoria has the highest dependence on the forestry with 3.4 per cent of the population employed in the sector in 2016. The Gippsland and Central Highlands region of Victoria has just over 2 per cent of the population employed in forestry, while regional Tasmania had the next highest proportion (1.6 per cent) but also the largest decline in employment dependence having fallen from 2.1 per cent in 2011.
1.28
The impact of the forestry sector on regional economies was also highlighted by a number of inquiry participants. As an example, the Softwood Working Group (SWG) stated that forestry was the ‘most significant economic driver in the [South West Slopes of New South Wales] region, supporting $1.2 billion in Gross Regional Product (value added).
1.29
Within this region, Visy Pulp and Paper (Visy) described its kraft pulp and paper mill as ‘integral to the local community’ of Tumut as it was the largest employer in the region, directly supporting 1,200 manufacturing jobs. Not far from Tumut, Hyne Timber (Hyne) has a similar impact in the town of Tumbarumba. Hyne, which employs 210 people and supports an additional 600 contractors and local businesses, stated it is ‘by far, the single, largest, non-government employer’ in the town.
Government Policy in the Timber Sector
1.30
The following section provides a brief outline of the current major government policies focussed on the timber industry. Implications of these policies are also discussed, where relevant, in later chapters.
National Forest Industries Plan
1.31
In September 2018, the Australian Government released its National Forest Industries Plan (NFIP), entitled Growing a better Australia, A billion trees for jobs and growth. The key goal of the NFIP was the planting of a billion plantation trees over the following ten years. The NFIP forecast that the addition of a billion plantation trees would result in the creation of an additional 18,000 jobs in forest industries.
1.32
The Department of Agriculture, Water and the Environment (DAWE) stated that the Australian Government committed to the following three actions to support the plantation of a billion trees in a decade:
undertaking a review of the water requirements in the Emissions Reduction Fund (ERF) farm forestry and plantation methodologies to enable forestry to fully participate in the ERF
working with industry and state governments to allow Regional Forestry Hubs to maximise their capacity to accommodate plantation expansion in the right places
reviewing other legislation, policies and processes that may be unintentionally restricting plantation expansion.
1.33
DAWE emphasised that while the objective of the NFIP is to support the expansion of plantations, the actual planting of new plantation trees ‘is a matter for state and forestry agencies and the private sector.’
Plantation Concessional Loan scheme
1.34
To support the objective of planting a billion trees, the Australian Government has announced a plan to introduce ‘Plantation Development Concessional Loans to encourage foreign and domestic investment in plantation establishment’.
1.35
It is anticipated that the Australian Government will invest $500 million in the Plantation Development Concessional Loan (PDCL) scheme which aims to support the development of 150,000 hectares of new plantations.
1.36
DAWE advised the Committee that a consultation paper relating to the PDCL scheme had been released in November 2019 seeking feedback from industry. DAWE stated, however, that the PDCL was yet to commence, as it had been ‘delayed due to the priority given to industry recovery work arising from the 2019-20 bushfires and the COVID-19 pandemic’. DAWE added that while concessional loans are not currently available for industry it is something the Department is ‘working on as a priority’.
Regional Forestry Hubs
1.37
In 2016, the Forest Industry Advisory Council (FIAC) recommended that the Australian Government establish forest industry centres or hubs in regional areas ‘with varied, high-quality wood resources that are close to wood processors, pulp and paper mills or export facilities.’ FIAC added that the ‘forest industry can identify appropriate sites’ for developing the hubs.
1.38
As part of the NFIP, the Australian Government announced that it would be creating nine Regional Forestry Hubs (hubs). The hub locations are as follows:
south west Western Australia
the Green Triangle of South Australia and Victoria
Tasmania (originally North/North West Tasmania)
north east New South Wales
South West Slopes of New South Wales
central west New South Wales
1.39
DAWE described each of the hubs as having ‘existing concentrations of wood supply resources, significant existing processing and/or manufacturing operations, established domestic and/or international transport links, and strong potential for growth’. DAWE added that each hub includes stakeholders from industry as well as state and local governments and each will undertake strategic planning and analysis to support the growth of forest industries in its region.
1.40
DAWE described the key tasks of the hubs as being to:
… identify new plantation opportunities, add value to existing infrastructure and processing capability, and maximise community participation. Hub priorities include encouraging local mills to invest in greater capacity and efficiency; increased use of mill and harvest residues, including bio-energy, biochar and fertilisers; and exploring opportunities for new product manufacturing.
1.41
DAWE reported that the hubs are in the ‘initial stages of cooperation’ but that planning is underway in some of the hubs. The Green Triangle Hub, for example, released a strategic plan in 2019 envisaging ‘an additional 200 million trees by 2030, covering about 150,000 new hectares’.
1.42
In the South West Slopes region of NSW the hub has been incorporated in the Softwoods Working Group (SWG), a joint industry and community group that has been in existence since 1987. SWG stated that its structure provides a ‘forum to examine strategic issues and prepare plans to focus on regional community development based on the local plantation industry.’ SWG reported that its membership included private and public forest growers, timber processors, local governments, Regional Development Australia committees, state government agencies, and the Forest Industry Council.
1.43
The Tasmanian Forest Products Association (TFPA) reported on progress within the Tasmanian hub, stating that stakeholders in the hub had identified the following four themes as priorities for its work:
access to land and land use policy for plantation forest investment
supply chain and infrastructure
climate change and carbon policy
culture, skills and training.
1.44
AFPA reported that the forest industry has been calling for the creation of two additional hubs, in the north of the Northern Territory and in south east New South Wales. The Forestry Industry Association Northern Territory (FIANT) noted that the forestry industry in the Territory currently employs 170 full time equivalent staff and manages 42,000 hectares of plantations and has the potential to grow. Outlining the possible role of a Northern Territory hub, FIANT stated that:
… a founding priority of the hub will be to establish a taskforce to analyse the factors that are limiting productivity and efficiency in the sector, [the creation of a hub will also] facilitate the Territory achieving a Carbon Farming Initiative certification and will therefore allow the industry to participate in the Emissions Reduction Fund.
State and Territory Government Policies
1.45
DAWE provided details of some of the forest industry programs being undertaken by state and territory governments. In particular DAWE highlighted the following:
in 2018, the NSW Government allocated $71.8 million over four years to support the forestry and wood products industry including $24 million for the Forestry Corporation of NSW to invest in plantations
in 2019, the Victorian Government released a plan to transition the industry from native forests to plantations by 2030
in 2020, the WA Government invited private sector investment with an aim of planting 50,000 new hectares of plantation.
1.46
The Victorian Government reported that, in 2017-18, it committed to investing $110 million into the expansion of plantations in the Gippsland region. The Victorian Government will also seek to leverage additional private sector funding for new plantation development. The expansion of the plantation estate is designed to ‘meet potential supply gaps resulting from the 2019 announcement that native forest harvesting will be phased out by 2030’. The Victorian Government added that ‘the primary intent of the program is to make available increased volumes of wood for local processing’.
1.47
The Tasmanian Government drew attention to the role of Private Forests Tasmania (PFT), a statutory authority dedicated to facilitating private forestry. The Tasmanian Government stated it was the only organisation of its type in the country and noted that it played a key role in the development of farm forestry projects in the state.
Committee Comment
1.48
The forest industry is a key generator of income for regional Australia, as well as being a critical supplier to the building and construction sector. While in many regions it remains one of the most significant industries, the gradual decline in the extent of the Australian plantation estate is a cause for concern.
1.49
Plantations require long-term investment and so business decisions that are made today will affect the industry for decades to come. The fact that, for many years, more land has been removed from the plantation estate than added to it will, therefore, have a continuing impact on the supply of timber available for domestic timber processors.
1.50
Reversing the decline in the plantation estate has been a goal of government policies for many years, both at the federal and the state and territory level, but to date these policies have had limited success. The Committee welcomes the Australian Government’s plan for the growth of a billion new plantation trees in a decade but notes that, while it is still relatively early days, this has yet to result in a tangible expansion of the plantation estate. The Plantation Concessional Loan scheme may help to drive new investment and the Committee urges the Government to move forward with the scheme.
1.51
The Committee also welcomes the recent establishment of nine Regional Forestry Hubs across Australia. Focussing development in a hub model enables transport costs to be minimised and it also provides a valuable forum for growers and processors to work cooperatively to develop the industry. The Committee notes, however, that the forest industry has been calling for the establishment of two additional hubs in the NT and south east NSW. Given the potential benefits from the implementation of the hub model the Committee recommends that the Government establishes these two additional hubs.
1.52
The Committee recommends that the Australian Government establishes two additional Regional Forestry Hubs, in the north part of the Northern Territory and in south eastern New South Wales.