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Forest and Wood Products Council Investment Workshop: address by Minister for Fisheries, Forestry and Conservation: Morwell, Victoria: 18 August 2004



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Last updated: 3 September 2004

Address to Forest and Wood Products Council Investment Workshop

Morwell, VIC- 18 August 2004

Thanks very much, Mark Kelly, and again thank you for what you do in putting these workshops together and, also, thanks to the Private Forestry Development Committee which, I understand, has done a lot of work in getting this organised.

Ladies and gentlemen, it's good to see you all here. I recognise a lot of the faces here. I guess the easiest way to refer to you all is to call you 'friends of the forest industry'. I did particularly though want to acknowledge Councillor Daryl White, the Mayor of this City, whom I understand gave a very interesting address as well as a warm welcome this morning; and there's Phil Millar from the Hepburn Shire I'm told, and Charles McGovern from Wellington Shire and, of course, Councillor Malcolm Hole I'm told is here, the President of the Timber Towns Association. I am delighted to see my Victorian parliamentary colleagues Graham Stoney and Phillip Davis here as well, I'm not sure if Peter Hall, the local member, has made it today but, ok, he was here.

To all of the other very distinguished people who are, as I say, friends of the forest. I was supposed to open this workshop so anything I would have said would have been new to you. Those speaking after me would have had to adjust their speech accordingly.

Regrettably, I haven't had the advantage of listening to the others so I hope I'm not too repetitive in some of the comments I have to make but, quite obviously, these investment workshops if we can call them that, are so very important. This is the third we've had so far, and I've been delighted to be involved in them. I think they do really focus the minds of supporters in industry on where we need to go. And, of course, the Gippsland area is a very appropriate place to have this particular workshop.

Forest and wood processing industries do provide this area with very significant economic and social benefits, over 5000 jobs I'm told directly involved in the industry and about the same indirectly. The forests I'm told accounts for almost 30 per cent the total gross value of agricultural production from the eastern regions of Victoria and,again,I'm told that five million tonnes of wood fibre is harvested annually, producing about $1.5 billion in turnover. So it's a fairly substantial part of this community particularly in the economic focus.

There has already been quite considerable efforts made to promote investment in forest industries in eastern Victoria. The Private Forestry Development Committee for Gippsland and the North East have produced a work called Gippsland Regional Farm Forest and Plantation Strategy and they did that back in 2000. I understand that was a very definitive document.

They've also done an important socio-economic assessment of the timber industry in eastern Victoria to quantify and draw attention to the importance

of the industry in this area. Many businesses of course, and I notice some people here who have been involved in this, have been applying for grants under the Forest Industry Structural Adjustment Package and we hope that the money that's gone to this region has been very, very useful.

Talking about the work of the Private Forestry Development Committee's do, just last week I announced that the Government had agreed to fund those committee's again for the next two years, I think it's $75,000 per committee to be matched by the State government and so the future of those committees is assured.

The importance of the industry and its promotion, I have to say to some extent, seem to have been ignored by the Victorian Government with its decision to reduce the harvest of the large sawlogs in native forests by one third across the whole of the state.

In the east Gippsland forest management area, there was quite substantial impact from that decision with harvestable volume cut by some 43 per cent and that of course did set the industry back quite a bit in this area. There has been some positive developments - Plantations for Australia - the 2020 Vision has been revised and relaunched and that's something that the State Government and the Federal Government have been involved in, working in partnership with local governments and with, of course the industry, both the processing and the growing industry and the community itself.

Through that partnership over half a million hectares of new plantation forest have been planted since 1997 and more than $1 billion has been invested in the forestry industry. And plantations are delivering a dividend of what I'd call wealth and employment in rural and regional communities.

The investment I think has expanded our future log supply and provided opportunities for downstream timber processors to lower their costs and this enhances industry competitiveness of course, both in the domestic and international markets.

The introduction of the Victorian Sustainable Forests Act 2004 does formalise the role of Vicforests in the management of the native forests supply contracts and hopefully it will improve the resource security for the forest industry in Victoria. There is a concern however, that the regulations under the Act may be constrictive and that the removal of any right to compensation if supply agreements are changed, could negatively impact upon investment.

I do hope the Victorian Government is conscious of that and can try to ensure there is confidence in this region and in Victoria generally to invest. Now that is of course a matter for the Victorian Government rather then for the Commonwealth Government and no doubt those of you involved, would have made your concerns known to the Victorian Government through your industry group and through direct contact.

The industry should look at the COAG agreement on the National Water Initiative with some positiveness I would suggest. A major objective of the National Water Initiative is to secure the integrity of water access entitlements and environmental outcomes, and as part of this the National Water Initiative intergovernmental agreements do call for the implementation of specific measures to address the potential for certain land use change activities that intercept significant volumes of water.

The intention is to determine when or whether a volume intercepted from any land use change activity is significant in the context of the water system

within which it occurred, that is future plantation proposals and other land use change activities such as dams and bores, may need to be assessed having regard to the regional circumstances and taking into account the positive environmental benefits and water resource productivity that plantations offer.

The Gippsland area, I'm told, is characterised by water catchments that are generally classified as being the least stressed in Victoria. And there is some real expectation that the prospective level of plantation establishment for east Gippsland will not be reduced due to any policy arising from water reform in Victoria.

On the infrastructure front the new Federal Government Roads to Recovery Programme I suggest could be useful or could be helpful. I understand there was some comment about road infrastructure during the course of the morning. As you know $300 million each year will be provided over the next four years through the Roads to Recovery Programme to upgrade and repair Australia's road network that Local Governments are responsible for.

But from the 1st of July next year a third of the Roads to Recovery funding, that is $100 million a year will be specifically set aside for local land transport infrastructure's of regional significance or of importance to emerging local industries. The Australian Government wants to partner local government in a forward looking agenda that focuses more on critical local land transport infrastructure that can really help a whole region develop.

Councils facing the demands of emerging or expanding industries which I hope will be the case with the forest industries, can access funds to ensure that inadequate infrastructure doesn't impede their region's development. There's no automatic entitlement I might say as there is with other parts of the Roads to Recovery funding and projects will be funded according to the strength of the bid and the level of support that the project has within a region, not just in a single Council area.

It's very important that any submissions put up to this additional Roads to Recovery money are done on a region basis and with as much support as possible. Funding will reward strategic and collaborative planning approaches among councils and the State governments as well in some instances, and certainly as well those planning approaches should involve local industries and importantly local communities.

In assessing a given project the Australian Government will want to know if the project enhances access for regionally significant production, resources, attractions or services and if it has the support of industry, community groups and other important stakeholders.

With the other funding going to local governments in eastern Victoria, some $72 million under the normal R2R funding, there is I think significant scope for the Forest and Wood Products Industry in this region to benefit from that extended R2R Program. You will need to work strategically and cooperatively in order to access those extra funds or those different funds and to make sure they're put to the best possible use.

Ladies and gentlemen the Forest Industry Structural Adjustment Package has provided $101 million since 1996 to help restructure the industry with value-adding initiatives. This joint Commonwealth / Victorian Government money has provided significant grants in this area and some $5.3 million has been made available to forest businesses in eastern Victoria to build processing plants, upgrade and redevelop sawmills and timber processing facilities and to purchase harvesting and milling equipment. All funds have

been committed and there will be no further calls for funding.

I have to say to those of you who are aware of the proposal from VicForests that it is a very, very good one and when I was down in this locality a few weeks ago, I did have a talk with some people about it. But I did make a comment that if I ever put Commonwealth money into Victoria again I will only do it on the basis of a firm and legally binding agreement from the Victorian Government to get certain resource outcomes.

One of my disappointments with the whole FISAP proposal was that we put the money in on the basis of an RFA which should have guaranteed reserves and it should have also guaranteed a timber supply. As you know that didn't happen and the agreement was such that it was difficult to enforce against the Victorian Government.

So whilst I'm interested in working with the Victorian Government in the future towards anything with which we can guarantee communities and workers jobs and resource security, I won't do it unless we have an absolute watertight guaranteed agreement. And, I'm sure we can work that through with the Victorian Government and I certainly hope they understand by now just how important the forest industries are particularly in this part of their State.

Some of the businesses that have benefited under the FISAP proposal have been TERRA Timbers, Austimber, Hallmark Oaks, OCB Logging, Drouin West Sawmills and Dormit. So all of those companies have very good projects that we're able to assist with some FISAP money.

I know Tony Purdy's spoken to you this morning and he would have told you about the Australian Papers expansion plans for Morwell. They're very, very exciting and as you know they want to upgrade their paper and pulp mill here in Morwell, and we did as a government provide Australian Paper with $500,000 through our Sustainable Regions Program to help with the feasibility study.

I understand there has been some concerns expressed that the expansion of the Australian Paper Mill will not be realised unless they're able to secure additional native fibre resource from the Victorian Government; however I am assured that the Victorian Government is actively looking to supply the additional native forests required by Australian Paper without impacting on existing contracts.

The Australian Government's main objective for the Forest and Wood Products sector is to encourage a sustainable and internationally competitive industry through the creation of appropriate environment for private sector investment, particularly in terms of adding value to our timber resource through the production of high value products.

And the Australian Government has supported this goal in a number of ways. Perhaps the most important thing we've been able to do federally is to create a commercially competitive environment through appropriate legislative frameworks.

We've tried to keep the broad economy going in the right direction, keeping inflation well under control, keeping interest rates down at levels where you can manage to borrow and invest, and keeping employment growth going, doing a lot of work internationally with trading arrangements, both bilateral and multilateral, and generally trying to keep the whole economy moving in a way that is conducive to business investment.

And I'm delighted to say since our government's been in power the housing industry has been very buoyant and that's been very, very good for a lot of those who make their living out of the forest and wood products industry.

We wanted to provide an investment environment and I think we have done that. We've seen public and private investment of over $9 billion in the forest and wood products industry in the past ten years. We've also supported that revision of the Plantations for Australia - the 2020 Vision that I mentioned earlier and that's working towards achieving a resource of some three million hectares of commercial plantations by the year 2020.

We've also, as those of you in the forest investment will well know, ensured the Taxation Laws Amendment Act was passed as one of the first actions in this term of government to encourage investment in plantation investment schemes. We've also set up the Forest and Wood Products Council, which I chair, which comprises the senior leaders of the Forest and Wood Products industry across Australia.

We also ensured the passing of the Regional Forest Agreements Act, which provided from the Commonwealth's point of view, a secure resource certainty for the industry. We've bound ourselves very clearly to the Regional Forest Agreements by an Act of Parliament. Unfortunately as I mentioned earlier we weren't able to bind the other signatories to the Regional Forest Agreements but we continue to work with the other parties to try and get a good outcome from all of the work that went into those Regional Forest Agreements back during the 1990s.

We have taken steps as well, and this is a very exciting avenue, to integrate forestry into the natural resource management framework. We have funded as I've mentioned the Private Forestry Development Committee's across Australia to support private forestry for environmental and commercial activities and benefits.

We have provided assistance to measure and monitor and promote sustainable forestry management with the key Australian Government achievements in this regard including the publication of Australia's 2003 State of the Forest Report which those of you that have had a chance to look at that will understand is a very useful piece of work and it does detail our performance against the Montreal Process indicators plus seven other very uniquely Australian indicators.

The State of the Forest Report has demonstrated that we are achieving our goals in sustainable forest management.

We've also continued to support the Bureau of Rural Sciences National Forestry Inventory and National Plantation Industry and they both provide very high quality data for the Forest and Wood Products sector, and we've helped, with the States and industry to develop the Australian Forestry Standard, a standard which will ensure or will highlight and reward sustainable forest management in conjunction with the forest and wood products industry.

We've established the Commercial Environmental Forestry project and I'm particularly grateful to Kate Carnell, whom I see here, and NAFI and CSIRO as well who've been partners in that Commercial Environmental Forestry project. As you know trees are needed in our landscape to address environmental problems, many of which stem from what I might nicely say was over enthusiastic tree clearing in previous generations, but the extent of the tree cover required for our nation is quite beyond the public purse.

The Goulburn Broken Regional Catchment Strategy suggests that in order to meet the proposed end of the valley salinity targets, 300,000 hectares of plantings / 500 stems per hectare are required in that catchment by the year 2050. At $1200 per hectare that equates to something like $360 million, which is money the public purse doesn't have. In many areas where trees are required, growth rates will be sub-economic.

Large-scale plantations can, if they're inappropriately sited, impact upon water resources. The need for trees and private investment, financial risk plus the impact on water has resulted in a new approach to public investment in natural resource management and that's what the Commercial Environmental Forestry project is all about.

We're bringing together private and public investment to establish targeted plantations for commercial and environmental outcomes. Work in that programme is very, very exciting and as I say it's the CSIRO, NAFI, Goulburn Broken Catchment Management Authority, Murray Darling Basin Commission, Victorian Department of Primary Industries and my own Department who are all working together to make that commercial environmental forestry project work.

Ladies and gentlemen I do want to announce today that the Australian Government has, through the Natural Heritage Trust committed another $2.9 million to that Commercial Environmental Forestry project. We did put $500,000 in last year and we have committed ourselves to another $1.65 million for the current financial year and $1.25 million for the next financial year, making a total of something like $3.5 million into that project, which I think will bear real dividends.

In the first year of that project, site-specific models of forest growth that predict harvestable yields for lower rainfall species were developed. Areas where re-vegetation will maximise salinity benefits whilst also conserving stream flows were also identified. By overlapping areas where good growth rates can be expected with those areas where salinity benefit will be maximised, it's possible to identify where good CEF projects are feasible.

In this current year of that Project, Bernard Young from the Private Forestry Development Committee, and I understand Bernard is in the audience somewhere, Bernard's going to be taking the project to the community in the CEF areas identified in the south-west of the Goulburn Broken Catchment with the aim of establishing a pilot planting there in August 2005.

Part of the process of engaging the community will involve forums and information sessions to avoid the negative perceptions about plantation forestry on this scale.

Research and development to be pursued in the current financial year include development of carbon models for lower rainfall tree species, further development of salinity models to better identify at the property scale the salt and water impacts of afforestation, and the development of a method to attribute biodiversity values to forest plantations, and that all allows plantations to compete more effectively for public funds.

The Commercial Environmental Forestry Project is about partnerships, and both the landowners and the industries are of course very, very vital partners. And that's a project that I think can change attitudes in the time ahead. It will be very, very useful for the future of the forest industries in Australia.

Ladies and gentlemen can I conclude by again raising and perhaps this is the

last time I'll have to offer a message to those supporters of the forest industry during this term of government. I want to, again, raise what I see as the only dark cloud on what is otherwise I think a very, very bright horizon for the forestry and wood products industry, and that dark cloud is ignorance.

Governments make decisions on all types of matters often reflecting public expectations and in the case of State Government's those expectations of the public are often translated into second preference votes that have in fact changed administrations in the State parliaments. But the public have formed their expectations I believe on the basis of falsities and from ignorance.

The industry and all others who believe in truth and good policy-making have to fight back and we have to lift the veil of ignorance from our fellow Australians. Most of us in this room understand how well managed our forests are, how sustainable they are. We know that only a very tiny percentage of our forests are harvested each year.

We know that plantations are essential to reduce our reliance on imported fibre that very often comes from forests that are destined for decimation and we know how plantations can address problems like salinity and carbon sequestration. We know that the huge tracks of forests that have been locked away in reserves, reserves of trees that are comprehensive, they're adequate and they're representative.

We also know that Australia has conservation reserves well in excess of those recommended by the IUCN, the world's peak environmental organisation. Our reserves are set aside well in excess of the minimum requirements that they talk about.

We also know of the benefits of regrowth forests, the positive impact that the forests have on tourism, particularly that sustainable forestry really does encourage tourism and allows people to get out and see things. We understand as well how well managed forests help control wildfires and biodiversity loss, and not to mention the number of Australians who are kept employed in our fourth biggest manufacturing industry and the fact that so much that is iconic about Australia, our country towns, in many instances only continue to exist because of the forestry industry.

So all of us know all of those things and with such a good story why doesn't the public know about that very good story? Why does the public continue to wallow in it's own ignorance? And the reason is that we in the industry haven't told them about it well enough. Above all other steps that any of us can take to support our forestry industry, governments and communities need to join together to get the real story told so that the mindset is not captured by those radical groups with a very deliberate political agenda.

And if you doubt my saying that, there is a very definite political agenda in some of these radical forestry groups. I just ask you to compare the real agendas of the Greens political party with those of extreme political groups overseas. But we do have to do that ladies and gentlemen. I see representatives from Timber Communities Australia, I know they fight the good fight, but we really need to get the story out in a much better, much more professional way.

The government is doing what it can but I do plead with State government organisations and the industry to do what needs to be done to get the real story told. It is critical I think to the future of this industry that our fellow Australians understand as we understand just what a fabulously sustainable

and successful and progressive and environmentally friendly this industry is.

We have to emphasise the investment that it brings to our country, the economic return that is given to our country, all of these positives that do indeed represent the forestry industry in this country. It's an understanding that we all have. I despair that our fellow Australians don't have it and we really do need to do something about that.

One of the goals of this workshop this afternoon is that we want to find out from you what your views are on the way you want the industry to look in twenty years time, and once you've determined that we want you to tell us how we should get there. These views will be used to assist the Forest and Wood Products Council in the development of a vision for the forest and wood products industry for the years ahead. We want to know what strategies and solutions at the local and regional level will be to attract investment into potential new and existing industries.

Ladies and gentlemen, can I finally conclude by again thanking you for being here? We do rely on the expertise and the knowledge that comes from groups of people like you. The Forest and Wood Products Council, as I say, does want to work towards a better vision for the industry and what you're contributing to this afternoon will help us come to that conclusion.

I know you're all busy people so I do again express my real appreciation for you making the time to be here and make your contribution.

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