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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2012-09-04 Daily Xml
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FORESTRYSA

The Hon. R.L. BROKENSHIRE (15:12): I seek leave to make a brief explanation before asking the Minister for Forests a question regarding the future of forestry in the South-East of South Australia.

Leave granted.

The Hon. R.L. BROKENSHIRE: I understand that many sawmills are now concerned about the future of supply at a reasonable cost when it comes to log supply via ForestrySA and subsequently the privatisation of ForestrySA. I noticed a letter to the editor in the most recent Sunday Mail by Dr Jerry Leech concerning the log supply with Carter Holt Harvey and the privatisation of ForestrySA. Dr Leech says:

A union has said that a 30 per cent reduction in saw log prices was necessary for CHH to remain viable.

He goes on to explain that the implications of a 30 per cent reduction in log price with CHH would see ForestrySA sales of $125 million last year drop by $37.5 million, which in turn he estimates would see ForestrySA's equivalent value become $100 million. Dr Leech then explains, importantly:

If CHH gets a reduction in saw log price or log term contract, then the Campbell Group can argue that its bid should be reduced. If it doesn't, then CHH could pull out of the South-East. The government now has little room to move. He has eliminated the other bidders and it is a catch 22.

I note that the CFMEU is now running radio advertisements supporting its position for locked-in log prices, and in fact occupied the ALP head office recently to protest its point. The Treasurer has reportedly made a $27 million Holden-style offer to keep Carter Holt Harvey in the South-East. My questions to the minister are:

1. Is the minister, as Minister for Forestry, concerned about the ramifications of a reduction in sawlog prices to CHH, causing it to move into markets that are currently different markets being looked after by other millers in the South-East and, if so, has the government considered the ramifications of this issue?

2. Has the government shot itself in the foot by announcing a successful bidder before financial close, leaving it in, as Dr Leech says, a catch-22 situation?

3. Does the government accept that the log supply and sale price issues are closely linked, given the price implications if a price reduction is guaranteed?

4. Has Carter Holt Harvey therefore got the government in what one could describe as a perfect storm of the government's own making?

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) (15:14): I thank the honourable member for his questions. I believe that some aspects of those questions have already been answered, but I am happy to go through them again.

As I said, CHH has been seeking to renegotiate the terms of its supply contracts. It sought to receive a discount on its log prices and approached ForestrySA. ForestrySA considered that, and my understanding is that ForestrySA did offer a discounted price to CHH on sawlog price, which CHH rejected. I have already outlined that they rejected that for commercial reasons, and the board had made a final decision on that.

It was then that the government intervened, and I have already outlined the negotiations made by this government around a support package to assist CHH. The cost of that was about the same price as discounted log for two years. There were other aspects that I have already raised in this chamber around the provision of capital upgrade to the sawmills, including reinvestment in the mills, improvement of efficiencies, and a whole range of things that this government tried to work on with CHH in terms of a deal that would really invest in the long-term future of the sawmill. A number of offers were made—and I have outlined those—which were rejected by CHH. That is obviously a decision it has made.

I have already said that the issue was based on the government believing that the position CHH is in is a temporary matter and is to do with industry issues. I have already outlined those: the dumping of cheap, imported timber onto our markets; the high Australian dollar; and a local global slowdown in the housing construction industry. We have seen a number of factors operating that we believe will correct themselves over time, and we believe we will see this industry back on its feet. The government's view is that it does not warrant log price adjustments over a long period of time.

I have already put on the record that the sale of the forward rotations asset has nothing to do with the problems associated with CHH. We believe that these problems exist irrespective of the ownership of these forests. I have already said that the sale of forward rotations is in no way contributing to the problems of CHH, and not even CHH is suggesting that the forward sale has contributed to these issues. Even the union leadership—Michael O'Connor and Brad Coates, I am advised—has made it clear that the forward sale process has not contributed to the issues facing CHH. They are the result of other factors, and we believe that these things are often cyclic and will resolve themselves in the future.

As I said, this government has already sought to provide generous assistance to CHH. Obviously, we are very committed to preserving the sustainability of the forest industry in the South-East, and we are very committed to ensuring that we preserve jobs in that industry as well.

The PRESIDENT: The Hon. Mr Brokenshire has a supplementary.

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