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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2011-03-23 Daily Xml
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FORESTRYSA

The Hon. R.L. BROKENSHIRE (17:02): I move:

1. That a select committee of the Legislative Council be appointed to inquire into and report upon the state government's proposal to forward sell harvesting rights in ForestrySA plantation estates, and any other related matters.

2. That standing order No. 389 be so far suspended as to enable the chairperson of the committee to have a deliberative vote only.

3. That this council permits the select committee to authorise the disclosure or publication, as it sees fit, of any evidence or documents presented to the committee prior to such evidence being presented to the council.

4. That standing order No. 396 be suspended to enable strangers to be admitted when the select committee is examining witnesses unless the committee otherwise resolves, but they shall be excluded when the committee is deliberating.

I move this motion because the state government's proposed forward sale of ForestrySA harvesting rights is a significant economic issue for the state economy and in particular, but not only, for the economy of the state's South-East, although there are forestry assets in the Adelaide Hills and the Mid North, which I will come to during my contribution. It was first announced in the 2010-11 state budget as a recommendation of the razor gang, and I call it that because that is what it was—not a sustainable budget commission—and it is important to remember who was in government during the period that saw us needing a razor gang.

The Hon. M. Parnell: Remind us.

The Hon. R.L. BROKENSHIRE: Well, the Rann Labor government was in office and caused the requirement for this. There is a fair bit of public documentation on that right now. It is a disappointment that one of our economic success cases needs to be flogged off to prop up a state budget and sad that Treasury's coffers need to be stacked with cash for the government to spend in other parts of the state when the South-East, because of its rainfall and infrastructure developed by largely private investment, will not see that money flow back to them.

There is a precedent for a select committee on issues such as this. We saw a select committee on the Penola pulp mill; half of those who heard evidence are no longer in parliament. I acknowledge that the pulp mill was about blue gum plantation timber, of which ForestrySA has no plantings. However, that was a process projected to have a $2 billion positive impact on the South-East economy.

The forward sale of one rotation of 37 years at a conservative $35 million per annum sees $1.3 billion in profit lost over 37 years; if you multiply that out over the two to three rotations, there is an impact ranging from $1.3 billion to $3.9 billion over the next 111 years—and that is without compounding, etc. So the pulp mill was worth a select committee, and over three years later they have hardly started building it—largely due to external factors, I acknowledge; although the ABC reported in February that some of the Penola pulp mill management team had quit, citing a difficulty in getting finance.

However, be that as it may, the precedent is there for a select committee into the forward sale, given that its prospective impact will be as large. The Penola experience is also instructive that the outcome might not match the reality, or at least be delayed in terms of anticipated economic benefit for the state budget, which the committee could look into.

I have some stats for my colleagues to consider. I should say that I note there are a number of select committees and that there is a fairly heavy workload on all of us in the Legislative Council at the moment. I do not move this motion lightly, but I believe it is an important issue when you start selling off state assets. In a bipartisan way, irrespective of the colour of the government, for over a century now ForestrySA has been building that asset base, and the ramifications and implications for our building industry and lots of other areas are huge.

It was in the 19th century when they first started planting forestry, knowing that we had issues around the lack of good timber product. Of course, we know that now everyone is supportive of protecting our native plantations, but we do need to have control over our own forests. Let us quickly look at some stats from 2009-10 for ForestrySA. ForestrySA has some 90,000 hectares, and that is approximately 200,000 acres of forestry planted throughout South Australia. It is about 7 per cent of the nation's softwood resources, and it is equivalent to the total land area that was burnt by the 2007 KI bushfires. There is $133 million in sales and income, a $46 million profit, up from $30 million the year before. So, there has been a significant rise in net profit to the government. Mill operator Ian McDonnell, a several generation miller from the South-East, says:

When looking at the value this asset brings to the state coffers each year, it is not just the $42 million reported last year, but there is also the other income stream the government enjoys via things such as payroll tax, land tax, GST back from the federal government.

An amount of 1.3 million cubic metres of sawlog was sold from plantations, 555,000 cubic metres of pulpwood was sold from plantations, and whether assets of $1.3 million in the ground is under-valued we will come to later. As I have said, these stats come from the 2009-10 report from ForestrySA.

Let us have a look at the employment. Directly, there are 205 full-time equivalents, per ForestrySA 2009-10 annual report. I understand that ForestrySA workers are very concerned about their job security as a result of this initiative by the government. The community impact statement provided to the Don't Privatise SA Forests group by Dr Bob Smith, one of the nation's foremost forestry experts, indicates that the direct employment attributable to ForestrySA assets is 2,150 jobs, mostly in the processing sector and, indirectly, some 3,090 jobs. At this point, we are seeing a fair amount of value-added timber opportunity, even into the regions.

I was talking to a truck driver on Monday, out of Murray Bridge, who was carrying pine, which I assume they got from the South-East. The contract to build some units down at Ridleyton or Taperoo, in that area of the western suburbs, was awarded to a Keith business, which is building all the framework for these units in Keith. So, it is giving value-added opportunities to the smaller country towns in the regions, and that is something that is desperately needed.

Mayor Richard Sage, Mayor of the District Council of Grant, estimates that some 5,500 jobs are directly and indirectly related to forestry. The overall forestry industry in the South-East contributes—and this is huge—about 18 to 20 per cent of gross regional product, or an estimated $2.8 billion in 2009-10, and directly supports 3,600 jobs, or 10 to 12 per cent of the region's 30,000 jobs. You can infer from that that the state forestry puts more into the local economy than private forestry which, at least at present, until the pulp mill is constructed, sends raw material interstate or perhaps overseas for processing. So, the value-adding is not yet occurring here in South Australia with the private sector.

That is also instructive when you consider what might happen if the forward sale goes ahead. The flow-on employment is more likely to mirror the private sector percentage, and therefore more jobs are likely to be lost. That is a matter that is usually of concern, I would have thought, to a Labor government and its union supporters. For sure, it is a concern to the union, which has been out there with the private sector and residents of the South-East at two significant rallies in the last six to 10 months on the steps of our parliament.

I want to say a bit about the history. It is easy to forget that it is not just the South-East, as I said earlier. There are plantations in the Mount Lofty Ranges, some not far from my own area, that create a lot of jobs through the Kuitpo region and in the Mid North. The first plantings were actually in 1876 at Bundaleer and Wirrabara in the Mid North, and they are still there today. They have obviously been re-planted, but those forests are still there in that region. Then, of course, there is Mount Gambier in the South-East.

Six years later, the South Australian woods and forests department was formed. It is interesting to note that the nation's first Arbor Day was celebrated in Adelaide on 20 June 1889, 122 years ago. Arbor days worldwide are days to celebrate the planting and care for trees. That first Arbor Day was not a public holiday, and generally around the world it is not, but now around 28 to 30 July is a national tree planting day. Bundaleer's experimental plantings were allegedly some of the oldest in the nation. The formation of the woods and forests department in 1882 was reportedly the first ever in the commonwealth.

Perhaps the government has forgotten the rich forestry heritage that we have in our state. Our state has a proud tradition and heritage in planting and caring for trees, both for environmental and economic purposes, and yet the government wants to flog it off for short-term gain, probably, I suggest, back to an investment in marginal seats prior to the 2014 election. Interestingly enough, the promises in those marginal seats add up to a figure towards what they are going to get for the projected sale of the forests.

It is worth noting that radiata pine was chosen as a suitable source for construction. Native trees had been used previously, but it was determined to be environmentally unsustainable to keep doing that in South Australia. ForestrySA has inherited some 20 native forest reserves, which is about 25,000 hectares and which they continue to manage. What is going to happen to the management of that 25,000 hectares if they are sold to the Chinese? I am not sure the Chinese will be all that concerned about 25,000 hectares of native forests that currently are looked after by ForestrySA.

Unlike other parts of the nation, we have not been harvesting our native forests for over a century. We can be seen as one of the pre-eminent environmentally activist states in that respect. In 1907, larger scale planting of radiata pine occurred in the South-East, followed in 1909 by the first plantings at Mount Crawford. The rest of the history can be traced on the ForestrySA website, but the point is that we have been involved in forestry, in the areas our climate and rainfall can support, for well over 100 years (as I said, it actually started in the 19th century) and about 80 per cent of the plantations are in the South-East.

I have a little bit of other information for my colleagues to consider. Arguably, the timing of this forward sale is wrong for at least two reasons. As Brad Coates from the CFMEU points out:

It is a very bad time to sell trees as a number of private companies have gone to the wall in the past 2 years, such as Timbercorp, Great Southern, Willmot and others.

It is also worth bearing in mind that, with Australia debating a carbon tax, it is possible that the commercial value of ForestrySA assets to the taxpayer could well be undervalued if the Gillard government succeeds in introducing a carbon price or a tax. I question the merit of proceeding with a forward sale when the future value of the asset may vary considerably in a carbon economy.

It is worth noting that we are yet to debate here the Natural Resources Management (Commercial Forests) Amendment Bill. I believe the impact that that bill may have upon ForestrySA as it presently stands and a potentially privatised or forward-sold forestry situation needs to be examined.

I congratulate the community, who have been out there with a very structured and carefully and strategically planned protest. There was a huge turnout on two occasions here on the steps of parliament. There were trucks fully laden with logs making their point at great cost to their companies. There were schoolchildren who see their future in a government-owned ForestrySA, taking on the work that is in their blood and goes back now to their great-grandparents. More people from the country are starting to make their voices heard and that is to be welcomed.

The South Australian Forest Industry Strategy Directions for 2011-2015 was recently released. It is a draft for consultation from the Forest Industry Development Board. It is interesting to note that, when you look at the critical analysis of the industry in this draft for consultation, there are some threats and I want to highlight one, that is, T5 in the coding, which states that the potential forward sale of ForestrySA's plantations is destabilising the current industry. This is from PIRSA, one of the government's own departments that has the responsibility for these forests. It is saying that it sees the potential forward sale of ForestrySA's plantations as destabilising the current industry. I think that is of huge concern.

I have a lot of respect for Michael O'Brien, and I have said that in this house before. He is transparent and he is open with me with everything that I ask of him with respect to meetings and opportunities to put points forward. I do not think Minister O'Brien wants to see these forests sold. I think this is driven by Treasury and particularly by Treasury officials, and I do not believe that the backbench—the rank and file if I can put it that way—of the parliamentary Labor Party would support this sale at all.

It says that the future export potential of the forest industry will increase significantly with the commissioning of new plants such as the proposed Penola pulp mill and a development approved wood pellet plant. Demand for wood pellets for electricity generation globally is projected to double by 2014, driven by government targets for converting to renewable energy sources in Europe and the United States. Further carbon sequestration opportunities and biomass for energy are likely to arise as a carbon price is introduced into Australia.

We commend successive governments for the work that they have done in developing a government-owned ForestrySA and I believe, from what I have just highlighted to the house, that there are four or five real reasons why we should not support the sale and privatisation of up to two or three rotations. The only way to get to the bottom of this is to have an open, transparent and independent select committee of the parliament so that we can bring all the players—the people who have concerns and the initiators of this move—before the committee and find out the implications and ramifications.

Clearly, from what I have highlighted to the house today and from what we are hearing from experts in the industry, this is a bad move for three reasons: first, it is short-term income for long-term loss of income to the state; secondly, it removes the control and management that we have over growth in jobs and the strong economic opportunity for our state by selling it off, most likely to a foreign country; and, thirdly, it threatens jobs and the stability of a region.

In conclusion, we are starting to lose the basic assets of this state. This is a renewable resource. With carbon tax proposals and the like, there may be other opportunities to capitalise on the expertise of ForestrySA employees and further grow economic strength in this state. I look forward to listening to my colleagues' contributions on whether or not they support this select committee but, as busy as we are, I strongly urge my colleagues to support this motion because I think this a very serious matter.

Debate adjourned on motion of Hon. J.M. Gazzola.

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