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Forest Fact File - Economics

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Subsidisation of Logging - Dagrun's Age Article, 25/5/94

Quote "the exploitation of the public wealth of the Victorian native forests for the private benefit of a few logging companies" Dr Andrew K. Dragun.

Bottom Line..... $50-85 million loss/subsidy per year

Why is it so.....
Royalties received $22 million for estimated CNR budget spent on forestry (by Auditor General) is $36 million hence the Auditor general report only deduced a $13 million loss.
However Dr Andrew Dragun has analysed CNR annual accounts and found that a minimum of $75 million and "probably closer" to 108 million. These figures give the loss of $50-85 million dollars.


Other Stuff....
Mr Houn (Age 20/5/94) contends that the cost of managing non productive forest would be greater if there was no longer.

Reference: Dr Andrew K. Dragun (25/5/94) "Hypocrisy on forest handouts starts at the top." Age. Dr Andrew K. Dragun senior lecturer, law, economics, and public policy, La Trobe University.

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Subsidisation of Logging Vic - Dagrun's Paper Jan 1995

Abstract Quote
"The subsidisation of logging in Victoria is found to be substantial being in the order of $50 million per year in terms of the direct costs to the State Government. However, this is a conservative estimate of subsidisation since a range of other social cost remain to be considered as well. A more reasonable estimate of the annual subsidy could be in order of $385 million."

Subsidy Components


1. Direct $50 million - DCNR revenue = $41 million, expenditure min $91 million.
2. Expenditures deferred to Gen. Vic. Treasury of $10 mil. for continuing salary redundancy, $100 mil. in Loans Council Provision.
3. Revenues forgone from the loss of $65 mil in water.
4. Conservation val. of $160 mil..
5. Recreation amenity lost, diminution in agriculture and fishery productivity.
Cost to the State
1. "The state government is spending $2.25 to get each dollar of timber royalty"
2. "Each dollar of exports is costing more than a dollar to produce, thus exacerbating Australia's continuing capital account woes."
Reference: Dragun, Andrew (1995) "The Subsidisation of Logging in Victoria.", Latrobe University.

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Subsidisation of Logging Vic
Australian Article, Wed 12th of July, 1995 (Professor Dagrun - Latrobe Uni)

The Admistrative Apeal Tribunal is hearing a case for Dagrun to be allowed to view the June 1994 monthly business report to verify his research into the cost of logging. Dagrun works shows that the profits made from logging of native forests are less than the costs

Reference: John Macley (12/7/94) "Logger Heads." Australian.

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Subsidisation of Logging Aus .
Clive Hamilton (ex RAC) Austrlian Article, 12/7/1995

"I think it is fair to say that there is a degree of subsidisation by all the State forestry management agencies going to native forest logging, except in South Australia where the industry is entirely plantation based." said Clive Hamilton former head of research for the Resource Assesment Commission (Now Heading the Canberra Based think tank the Austrlia Institute).

Reference: John Macley (12/7/94) "Logger Heads." Australian.

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Australian Debt to Forestry - RAC

End of 80's - 5 billion dollars - plus the interest paid

Reference: Resource Assessment Commission Consultancy Report by the Australian Bureau of Agricultural and Resource Economics.

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Wood vs Water (Tomson)

"The total value of water from the Tomson catchment per year is more than ten times the total value of timber from the Thomson catchment per year (the NPV (?Net Potential Value?) of catchment outputs for the base case comprises timber production of $55 million and water supply augmentation costs of $1,337)"

Job losses estimated from removing logging the Tompson, 135 full time job equivalents.200 year rotation stripe thinning has the highest NPV value for the Tompson. Next is no logging. If either the cost of water augmentation was doubled or discount rates where 2% or less the economic argument would move strongly in favour of no logging.

"The case for longer rotations, with or without strip logging, or a cessation of logging is strong from the viewpoint of the State's finances."

Table 7.1 Financial Analysis (8% discount) Net Change in NPV for each Option Relative to the Status Quo ($M)

1. No Logging = 44
2. Clear Fell at 20 = -525
3. Status Quo = 0
4. Clearfell at 120 = -5
5. Clearfell at 200 = 200
6. Thin below/fell 50 = -83
7. strip at 20/fell 50 = 15
8. strip at 50/fell 80 = -12
9. strip 50/fell 120 = 15
10. strip 50/fell 200 = 81
11. strip 10&20 fell 80 =16
12. strip 20&60 fell 120 = -25
Reference: Sturgess, Read, and Associates, (1994), "Phase two of the Study into the Economic Evaluation of Wood and Water for the Thomson catchment, for Melbourne Water and the Department of Conservation and Natural Resources.", Tasman Economic Research Pty. Ltd.

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Forest Types with Negative Cash Flows - Box Iron Bark

Expenditure of the Bendigo region in 1991/92 was $1.3 million, compared with revenues of $585,000 in the predominantly Box-Iron Bark

Reference: CNR, (1993), "A Research and Development Plan For Victoria's Native Forests, Draft No. 2"

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Big Profits for Harris Dishower

A net profit of 6.03 million dollars for the calendar year of 1993 and $6.08 million in 1992, on et assets of $18,5 million giving a strong 33% return.

Reference: The Sunday Age 22/1/95 "Timber industry faces own danger." - page 17.

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