A report on Tasmania’s forest industry says the struggling sector is a warning to state and federal governments against “throwing good money after bad” via industry assistance packages. Source: The Australian
The paper, by the Australian National University’s Andrew Macintosh, suggests Tasmania’s native timber industry will struggle to survive, even under the latest $300 million-plus federal rescue plan.
Commissioned by the left-leaning think tank, the Australia Institute, the report concludes that environmental restrictions have “little if anything” to do with the industry’s woes.
Instead, Associate Professor Macintosh, associate director of the ANU Centre for Climate Law and Policy, argues the sector is declining in competitiveness and struggling against rising costs and falling demand.
“The problems that have beset the native forest sector look likely to continue into the foreseeable future,” he said.
“Given the precarious state of the sector, the critical policy question is whether the provision of further assistance is an appropriate use of government resources. There is a significant risk that any new government assistance package, including that proposed through the intergovernmental agreement on forests, will encounter the same problems.”
Macintosh suggests that without the federal package, which aims to shift the industry further towards plantations and value-adding and to fund industry exits, the sector is “likely to continue to decline and in some areas . . . collapse entirely”.
However, the report suggests that governments may be better to let this occur.
According to the report structural challenges are likely to remain, meaning the assistance package will merely postpone the inevitable and Federal and state governments should be wary of falling for a form of sunk-cost fallacy, where they ‘throw good money after bad’ in a future attempt to perpetuate an uneconomic activity.
The report’s release comes as the Tasmania’s upper house is due to resume debate on the Forest Agreement, which is underpinned by the federal package. Industry and conservation signatories to the deal argue it is fundamentally different to previous failed packages because it is not a “political fix” and because it commits green groups to backing the sector.
However, the legislation to enact the deal faces major amendments by legislative councillors.
