Budget papers reveal the commercial agency in difficulty

Gavin Butcher

It’s not only the timber industry that’s in decline, the government’s forestry agency, the Forest Products Commission (FPC) is also sinking fast. The WA 2023-24 Budget Papers indicate that this commercial business is failing under the Labor Government. It is predicted to continue to make losses in coming years.

When Mia Davies handed the Ministerial responsibilities for forestry to Dave Kelly, the FPC was a highly profitable operation with a healthy cash balance, but under the dead hand of this government the agency has fallen into hard times. It has produced a series of devastating losses which are predicted to continue for the foreseeable future.

To keep the agency afloat the government has had to pump in a bundle of cash, $25 million to be precise, over the past 2 years. Nothing more is being set aside this year, but there is little doubt that the FPC’s financials are diabolical and there will need to be handouts for several years. The housing industry, the mainstay of the FPC’s pine business,  is sinking like a stone, so Treasury will need to get its cheque book ready.

The FPC’s financial forecasts are hard to believe. With the closure of the native forest industry FPC’s sales revenue is estimated to drop to $120 million next year. Then like Lazarus it leaps by 25 per cent in subsequent years. This recovery is a fiction. The budget notes admit that the government has no idea what revenue will be generated in subsequent years. Why the government presents obviously false figures is highly questionable. There is little doubt there will be no significant revenue from native timber sales and the native business will need to be heavily subsidised to operate.

With such a hit to its bottom line responsible managers would have cut back on corporate costs and staffing. Not the FPC. As the ship is filling with water it is taking on 30 more staff!

The FPC has the dubious honour of managing one of the State’s most significant financial risks. The government has admitted to a possible shortfall in pine logs to meet contracts (Budget Paper 3 p59/60), but they claim this shortfall can’t be quantified. If you check the FPC’s Annual Reports since 2013 it has repeatedly made this statement. If this liability were so significant to appear in the State budget you’d think someone at FPC would have got round to calculating it.

The FPC is stumbling in other parts of its operations as well. With an industry wracked with uncertainty there would be an expectation of leadership from the State’s forestry agency. Unfortunately the FPC is silent in planning for the industry’s future. Its most recent Strategic Plan was published in 2017, and since then its focus is on social media rather than engaging with industry. The FPC is a monopoly supplier of many log products in the State, yet its customers and suppliers are in the dark as to its expectations. There has been no commitment from the FPC or central government as to when future volumes and contracts will be known. It is little wonder that it is struggling to find contractors willing to continue to work for it.

Even in the area of expansion the $350 million for new pine plantings is clouded in mystery. No plan for the roll out of these funds has been published. As a result you can understand why Shire Council’s are questioning the government’s intentions, but as with all other aspects of the industry they are left in the dark. The Budget Papers indicate that about 75 per cent of this expenditure is for the purchase of land; but there is no discussion as to whether other options have been considered to get more trees into the ground ahead of establishing a real estate portfolio.

The wheels have fallen off the FPC. It has been unable to supply log demand and its contractors are withdrawing their services in a vote of no confidence. Local consumers relying on wood are the victims of the decay of the WA forest industry. Even the basics of publishing FPC’s Annual Statistics Report can’t be done in a timely manner; it’s 8 months late in providing some level of accountability for its stewardship of the State’s forest resources.

The capacity of team of Commissioners heading FPC should also be questioned as there appears to be a lack of recent forest industry experience to give oversight to the functions of the agency in such a difficult time.

As an operating model the FPC is failing, one can only wonder how long it can pretend to be a commercial business and a support for the local industry.

Gavin Butcher is a former director of the WA Forest Products Commission.

Australian Rural & Regional News welcomes and has sought a response from the Forest Products Commission.