Question Time

FORESTRYSA

The Hon. D.W. RIDGWAY (Leader of the Opposition) (14:45): I seek leave to make a brief explanation before asking the Minister for Forests a question regarding a government minister saying he won't break the law.

Leave granted.

The Hon. D.W. RIDGWAY: On the 27^th of last month—that is, just over a week ago—state Treasurer Jack Snelling said, and I quote, 'The government has already made it clear that it can't interfere with log contracts.' More poignantly, on 16 August, the Treasurer said, and again I quote:

ForestrySA have an independent board. Like most government enterprises, they operate at arm's length from government and they have a statutory obligation to run their business on a commercial basis.

That same day, the Treasurer tightened the noose around his own neck when he said, and I quote again:

What I'm saying to you is I'm not going to break the law. The law is quite clear, the government can't interfere in the commercial operations of ForestrySA...

My questions to the minister are:

1. What section of the act prohibits the minister from directing commercial operations of ForestrySA?

2. What clause in that section would the minister have broken if the minister had directed the board of ForestrySA?

3. What is the legal penalty for breaking the law? Is it a gaol term?

4. Has the government offered to reset the log price on a capped volume of 360,000 cubic metres of log from ForestrySA to the South-East timber producer Carter Holt Harvey?

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for Tourism, Minister for the Status of Women) (14:47): I thank the honourable member for his questions. Carter Holt Harvey (CHH), as members would be aware, are seeking to renegotiate the terms of their contract with ForestrySA. My understanding is that they currently operate two sawmilling facilities, two particle board facilities, a moulding plant, a log preservation operation—

The Hon. D.W. Ridgway: Can you answer the question? I didn't ask about the size of their operation.

The PRESIDENT: Order!

The Hon. D.W. Ridgway: Well, we've got to start off on the right foot, Mr President. Answers will be what we need this time around in the lead-up to Christmas.

The PRESIDENT: Order!

The Hon. D.W. Ridgway: Not waffle, not sawdust.

The Hon. G.E. GAGO: All these matters are relevant to answering this question. I am happy to take as long as is needed to listen to the member's interjections while I try to make sure that this answer is comprehensively responded to, not just some glib yes/no response.

The Hon. D.W. Ridgway: Glib! Well, get on with it if it is going to be comprehensive.

The Hon. G.E. GAGO: Well, the honourable member should listen and not interject. They employ about 1,000 people and they have been arguing that their Australian sawmills are running at a loss and that they would close their mills unless contractual positions on their log price would be renegotiated. The high Australian dollar and the historically high level of structural timber imports and low housing starts in Australia are affecting all timber millers, not just CHH, and we believe these issues will correct themselves over time and do not warrant log price adjustments over the longer term.

Members would be well aware that the government has sought to offer assistance to CHH. In June ForestrySA made an offer for a long-term discounted price on sawlog. That offer was rejected as ForestrySA had done all it could to be consistent with its own charter which ensured that it acted in a commercial nature. The government then entered into direct negotiations, for which the Treasurer has had responsibility. As a result, we offered a rebate based on the amount of sawlog that CHH has been taking from ForestrySA, which had the effect of giving CHH the discounted price that it sought for two years. This was offered on the basis of consistent advice from all government and independent experts who informed us that the current difficulties in the market are temporary.

Mr Hart again rejected that offer. He essentially reiterated his position and, as negotiations progressed, Mr Hart decided to tell CHH employees at Mount Gambier that, as a result, it was likely that he would have to close the mills. Despite this, a further offer was provided, which included a provision for a capital upgrade of the sawmills in Mount Gambier. This offer included a component linked to the reinvestment in the mills to increase their efficiency, something that Mr Hart had previously refused to commit to. This was an offer of significant funding, equivalent on a per capita basis to the funding that we provided for GMH, and Mr Hart then again rejected that offer.

It should be made clear that the sale of the forward rotations has in no way contributed to the issues facing CHH, and CHH is in fact not suggesting that the forward sale has contributed to these issues either; and that the issues facing CHH are other factors, as I have alluded to, which include the dumping of cheap imported timbers on the market, the high Australian dollar, etc.

In relation to the first part of the member's question, I am happy to refer that to the Treasurer. They are comments that the honourable member attributed to the Treasurer. I am sure the Treasurer would appreciate an opportunity to respond to that in the context he would have provided.

As we know, ForestrySA does have a commercial charter, and it is required to make decisions in the interests of that commercial charter. It has considered the proposal put forward by CHH, and its board made the decision that that was not in the interests of ForestrySA. In fact, their view was that it would not only have a significant adverse impact on their commercial arrangement, but it would likely have a flow-on effect, although it is accepted that CHH is one of our largest timber buyers. Nevertheless, it is highly likely that if a discount was given to them all of our other buyers would have come to us and demanded a similar discount as well.

So, the board made that decision in light of those matters, and I certainly support and stand by that decision. I certainly commend the Treasurer for his extraordinary efforts to negotiate a reasonable and sound proposal to CHH which, indeed, has the long-term interests of forestry at heart.