The $276 million federal rescue package to buy peace in Tasmania’s forests came barely three weeks after the state’s Auditor-General indicated that Forestry Tasmania was staggering towards insolvency and would need an equity injection of $200 million to $250 million to survive.

Tasmanians’ collective amnesia has meant the Auditor-General’s warnings have been relegated. The public discussion is whether the promise of federal handouts will bring peace in our time, whether the warring parties will finally call a halt to hostilities. No mention of the enormous funds needed to prop up the state government’s forestry arm. Or the private funds required to transition the industry to a new era.

Banks are remaining on the sidelines. The recent Forest Enterprises (FEA) restructure deal, a pragmatic solution to part of the MIS mess — where the interests of growers, shareholders and creditors were to merge in one entity  — looks to have fallen over, so it’s back to the drawing board for FEA’s voluntary administrator.

The forest industry couldn’t even organise themselves to buy the Triabunna woodchip mill from Gunns as the latter struggles to survive. The mill is an integral part, apparently, of the entire forest industry in the south of the state, but Gunns needed cash in such a hurry to pay redundancies and loan commitments it wasn’t a surprise when a cash offer from Jan Cameron and Graeme Wood trumped a couple of bumbling bushies who were attempting to gain finance from the state’s Development Board.

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Part of the federal package, $120 million, will be directed to spending in regional areas, an approach that recently the Grattan Institute has doubted produces adequate returns.

The state’s Economic Development Plan, which Premier Lara Giddings keeps threatening to release but never does, doesn’t even include forestry as one of the state’s key sectors. All participants in the debate don’t seem to understand that Forestry Tasmania will not survive in its current form without a bucketful of government money.

Forestry Tasmania has also become dependent on federal grants from the Tasmanian Community Forest Agreement to fund ordinary operations. The state’s Auditor-General has been trying to compile a report into Forestry Tasmania’s performance for more than three years and has just reported to Parliament, including his first two drafts, which have been sitting in state government in-trays for two years.

Had the earlier drafts been released the conclusions would have been that the “investment in roads and plantations over the past 15 years will not lead future benefits … that dividends paid (to the state government) had been entirely funded from abnormal receipts such as Commonwealth compensation money”.

At that time reform of Forestry Tasmania may have been possible. But the period since has seen its situation worsen to such an extent that it’s only a matter of time before the life-support machine is switched off.

The state government will have to sort out the mess without the help of the feds, but trying to win an extra $250 million as suggested by the Auditor-General is an impossible task for the state government.

The peace offering from Julia Gillard is at best a partial political solution. Under no circumstances will it be sufficient. The problems are far wider.

No amount of soothing words from the premier can hide the fact that she is hopelessly out of her depth, badly advised, fending off the lynch mobs and desperately trying to search for scapegoats. Public policy makers have failed badly.

*John Lawrence was employed as an economist for five years before returning to Tasmania as an accountant in public practice and an observer and researcher on finance and economic matters at the state level. Read the full version of this article at Tasmanian Times.