Ron Wilson
I have written this opinion piece after attending a Forestry Australia webinar from ABARES on 12 March 2025 from the latest State of the Forests Report – Synthesis 2023.
The information provided gives a strong impetus for Australia to review its National Forest Policy 1992 to address the looming shortages of structural timber and what options are advisable to address these issues. The cyclic nature of timber demand, particularly during a slump, as reported currently, can dampen thoughts of addressing the long-term position for plantations, which have a long period between investment and return. This is a long view issue.
Forestry and timber production is a great industry for Australia with major centres in all states except NT.
Softwood forestry plantation areas have been relatively static since 2011-12 despite the increasing demand for timber and Government programs to stimulate investment and plantings.
Total area from State of the Forest’s Report Synthesis 2023, is around 1 million hectares of softwood plantation and around 0.7 million hectares of hardwood plantation. Hardwood plantation areas have declined from a high of 1 million hectares in 2011-12 mainly due to transfer of land back to agriculture following harvesting of the tree crop.
Timber production from softwood plantations, which are long rotation 25 years plus, is predominantly sawlogs 8 million m3 and pulpwood 6 million m3 for a total of 14 million m3. Softwood pulpwood is sold from first thinnings and is a by-product of later harvesting operations.
Timber production from hardwood plantations is predominantly pulpwood, currently at 8.5 million m3 largely from plantations established during the MIS programs up until 2011-12. Hardwood plantations producing pulpwood are predominantly short rotation around 12-15 years.
Despite the small areas of additional new plantations since 2011-12 there will be a static future domestic timber supply with increasing shortages, according to published articles from the Housing Industry Association, ABARES and other authoritative bodies.
The Housing Industry Association (HIA) forecasts that Australia’s timber demand will continue to rise, driven by population growth and housing construction, potentially leading to increased reliance on imported timber if domestic production doesn’t expand. The HIA, along with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), predicts that demand for sawn softwood will continue to grow, primarily due to housing commencements and GDP growth.
The HIA’s housing forecasts are consistent with the predicted timber demand, estimating that there is demand for the construction of around 200,000 new dwellings per year on average in Australia. Imports of sawn timber in 2022 were around 700,000 m3 representing 30% of total timber demand.
The main timber product needed in future is sawn timber for residential and commercial buildings. This timber is sourced from softwood sawlogs produced from long rotation plantations.
The main impediment to developing new long rotation plantations is economics where the cost of establishing plantations, particularly on purchased land and managing those plantations until timber harvesting of the major crop at generally 25 years plus, is very sensitive to the rate of return and assessed as too long, with the natural risk factors including fire, for most investors. Insurance for forestry plantations is now very difficult and costly.
Investors and State Government forestry agencies have been happy to purchase existing long rotation plantations generally 10 years and older, but have infrequently established new plantations from year zero since 2012. For softwood plantations there is replanting of harvested areas.
Victoria and WA have announced programs to develop new plantations to attempt to counter the closure of Government native forestry businesses in those states. These programs will take years to result in additional plantation resources, assuming they proceed as planned.
The Commonwealth and State governments grants, and loan schemes have resulted in modest areas of plantation development over the past 2 years.
The DAFF program to support plantation establishment over 4 years 2023-24 to 2026-27 has resulted so far in approvals for establishment of around 11,000 ha of long rotation softwood plantations and 2,500 ha of hardwood plantation. This program is welcome, despite its impediments, but will not reach anything like the levels of new plantation development to satisfy forecast domestic demand.
There has been a reduction in the area of hardwood plantations following the demise of the Managed Investment Scheme plantations 15 years ago due to a transfer of some plantation land back to agriculture after harvesting the tree crop.
Unless there is a circuit breaker in the basic economics, Australia will import increasing supplies of timber from overseas, which could otherwise be grown locally.
The Government’s Carbon Farming Initiative does include developing forestry plantations with potential sale of carbon credits. Forests, and timber in buildings have embodied carbon which is part of Australia’s push to achieve net zero emissions in 2050 and is part of United Nations strategies.
This is a positive, but the policy is not yet resulting in a significant uptake of plantations as shown in the 2023 Report. There are some impediments in the detail of the CFI including the “7-year rule” which are counterproductive and in need of review.
For residential homes the main product is sawn softwood with some hardwood for strength in frames and trusses. Sawn softwood timber is usually grown for 25 years and more, requiring long rotation plantations.
For multi-story and commercial buildings the main product is engineered timber including Cross Laminated Timber. While the timber used may be from younger trees the factories producing this product are high tech with supporting design services and a significant proportion of the engineered timber is imported. The Australian factories producing such engineered timbers are a valuable asset.
The current Commonwealth policy of “Made In Australia” has a focus of developing industries which will support Australia in the decades ahead, where Australia has economic advantages in an emissions restrictive economy, compared to the densely populated areas of Asia and Europe. This should apply to forestry in general but will need serious promotion in the current climate.
In such a scenario short rotation plantations could supply basic fibre for chemicals and essential liquid fuels instead of oil.
Short rotation plantations (10-15 years) have shown to be more attractive for investors than long rotation plantations, as demonstrated with the Managed Investment Scheme programs in 1990-2010 targeting hardwood pulpwood for paper. However, any schemes to support short rotation plantations will likely require significant investment in technology in Australia to use the resource domestically and with better regulation of plantation development than the previous policy.
Impediments to expanding the plantation estate include;
- Investment in long rotation plantations of 25 years + is not attractive to the corporate sector or State Government forestry agencies.
- Risks include fire and other natural hazards, which can degrade the resource and resulting in high costs for insurance.
- Land is expensive if needing to be purchased for plantation, particularly in areas with reasonable access to the timber processing industries.
- Regulation for plantation establishment varies between states and can be an impediment. For example, Victoria does not have a Plantation and Reafforestation Act so therefore there is no certainty in purchase of land for plantation.
- Opportunities for expanding the plantation estate include;
- Having existing owners of suitable land to develop plantations, which is currently a key objective of the Forestry Hubs established by the Commonwealth Government.
- Enhancement of the carbon market for forestry plantations, to remove some of the barriers in the Carbon Farming Initiative.
- Research and development in uses of timber has been improved recently with grants from Government and stimulus for new products such as cross laminated timber and engineered timber in multi-story buildings.
- Government investment in infrastructure such as roads and fire detection and suppression systems, including the recent $13 million program in NSW.
While these actions are currently in play there is very little additional new plantation areas being established.
A new approach is needed to kick start expansion of the forestry plantation sector, or if no significant action is taken, then Australia will be increasing its import of timber.
International economics and development principles steer countries to focus on activities where those countries have a natural advantage and avoid activities where importing is a more efficient strategy.
Australia should have a natural advantage for the areas of long rotation plantations needed to satisfy forecast future demand, but the evidence so far from ABARES does not support that view.
It may also be that shorter rotation plantations can be developed for timber products which meet the needs of the house and building construction industry, and other products such as liquid fuels and chemicals. In this case the private sector may be prepared to invest in such shorter rotation plantations.
In a presentation I made to the Forestry Australia Conference in Launceston in 2021, I showed that major increases in plantation area only occurred as a result of significant investment by the Commonwealth government with the Softwood Loan Agreements of the 1960s and then the MIS program of the 1990s.
If it is economically advisable to significantly expand the long rotation plantation estate now, it has been shown that the Commonwealth Government will need to develop further policies and take action. The key objective will be that Australia should have a somewhat larger long rotation plantation estate.
There are various ways that the Commonwealth can achieve such an expansion but is effectively an injection of funding to neutralise the impediment of long-term investment with the risks. This can be underwriting the costs for the first 10-15 years of the life of plantations and then transfer those plantations to the private and State Government sector at fair market prices.
According to Huw McKay, previously Chief Economist BHP, the Australian policy for critical minerals has some similar features where the Government underwrites long term supply but the private sector manages supply and marketing in the shorter term.
A new National Forest Policy for the forestry plantation sector should consider all such options and develop programs for action.
Ron Wilson is a forestry consultant to AgriWealth Group and previously senior manager in what is now Forestry Corporation of NSW.
