Nothing succeeds in flagrant waste quite like Big-Government.
Following in Soviet footsteps with gusto, politicians of all persuasions manage business failure on a grand scale. Did you miss yet another case-study on 7:30 report from last week (see the segment there)?
A mass of taxpayer-funded forests designed to make Australia self sufficient in plantation timber and paper are now being burned by land owners as the companies running the schemes collapse amid allegations of rorting, fraud and mismanagement.
The Howard government made plantations a tax deductable investment, and then the Rudd and Gillard governments made it even worse — broadening the rules in 2008 to include trees for “carbon sequestration” (which perversely could still be logged). Lo and behold, two and a half million acres of taxpayer funded forests were planted. What could possibly go wrong? Just a few things:
1. The bottom fell out of the timber market. There is no demand for the wood and the trees are not worth harvesting, so the forests are being burnt and the land reclaimed for other purposes.
2. Whole districts of farming communities were upended by the artificial boom and bust, as farmers sold their properties to the plantations, which are now largely broke, collapsed, and mired in legal trouble.
KAREN STEPHENS: Now, you can imagine how you just take 70, 80 jobs out of a community overnight. Nobody came running to us to say, “Can we help Casterton?”
3. As a nation Australia lost the useful products that could have been created from that land. The nation also lost the taxes that would have accrued, both from the investors who avoided paying tax and from the lost opportunities of businesses which might have done something useful with the capital, the land, and the workers.
GREG HOY: Sure enough, disaster struck. The bottom fell out of the timber market. Scheme after scheme has imploded. Only in plum plantations near seaports is timber harvested. Governments still won’t confirm the total tax revenue squandered on this grand scheme.
DAVID MARSHALL: I would estimate a minimum loss to government of $5 billion.
4. Investors lost millions.
GREG HOY: In the Victorian Supreme Court, Australia’s largest class action involving 20,000 investors against Great Southern grinds on. At the 11th hour, former forest manager Gavin Ellis now says he will give evidence he personally discussed concerns that the company had misled investors with Great Southern’s founding director John Young.
5. The generous tax minimization scheme appears to have attracted less than honest players who produced prospectuses which misled investors.
GREG HOY: 7.30 has obtained documents from the former Great Southern Group revealing internal data on past and forecast timber yields. Prepared by key executives including company director and general manager of forestry Gavin Ellis, these figures are very different from numbers used in Great Southern’s prospectuses. We’ve shown them to agribusiness analyst David Marshall, who feels strongly investors were misled.
DAVID MARSHALL: A lot of this information has been hidden and buried, etc., but it’s slowly coming out. Internally their general manager forestry, the director of forestry on the board, they were submitting papers to the board showing that the average growth rate and the stumpage price – they’re the two key drivers of the return on a timber investment – both of them were between 40 and 60 per cent below what the prospectuses were saying.
SAM PATTON, AGRIBUSINESS VALUATIONS AUSTRALIA: They could make these statements and yet no-one was independently auditing on behalf of taxpayers so there was just this unilateral lack of accountability by government in not supervising them.
6. In the end, the only people who profited from these schemes were the promoters:
Young, seen here in the garden of his plush Perth mansion, heavily sold shares in Great Southern before the company collapsed. In court he’s already spent almost $2 million mounting a vigorous defense.
Despite the abysmal record governments have in business, the Rudd government tells us we need a carbon market. The global emissions trading scheme was at one time forecast to become the largest single commodity market in the world, bigger than oil or wheat. The proverbial market-disaster, waiting to happen. It’s a market in atmospheric nullities in the third world, where both demand and supply are set by a foreign, unelected government, and the end “product” is nicer global weather?