NZ Government’s free market approach naive

“New Zealand’s primary industries have this week been dealt another blow to value-added forestry products as Norske Skog has favoured re-building their Tasmania paper machine, over the one in Kawerau, and the reason is clear – government subsidies bought the deal for Australia,” said Forest Industry Contractors Association CEO, John Stulen.

The National government has led us to believe that the market will take care of everything which is a naive approach when all around the globe individual countries’ economic leaders are now having to use direct subsidies to repair the damage done by “free-marketers” in the 2000’s boom that preceded the current ‘bust’.

Norske Skog announced they are committed to a future in Australia. Somehow that’s not surprising considering their AUD $84 million attracted almost 50 percent more money in subsidies to avert closure there. Substantial funding support from the Australian government meant that Norske Skog chose to refurbish the operations at Boyer over Kawerau. Clearly the future growth opportunities for the Norske Skog group are now in Australia.

“It is questionable whether the people of Kawerau were even consulted by the Norske Skog international operations team. Norske Skog management would be well aware that the current administration in New Zealand is not open to discussing subsidies,” added Mr Stulen.

The Forest Industry Contractors Association is part of Woodco – the forest and wood products industries strategic group which is looking for new ways to add value and produce greater earnings and GDP through exporting more processed wood products.

“This decision from Norske Skog makes it clear that private money is looking for some government funds to prop up their investment decisions on which mills to keep and which to close,” said Mr Stulen, “I just hope that either the Kawerau Economic Agency or the Bay of Connections groups got a shot at trying to keep Norske Skog’s next capital injection here, but I doubt they even had a look-in.”

Sadly, for forest contractors and many other vital New Zealand businesses in the forest and wood products supply chain, this is step in the wrong direction.

“How much tax have mill workers paid over the years? Don’t they deserve the chance of a short-term hand-UP? Maybe we are wrong to think that a bit of government money to save an industry is better than 10 or 20 years of paying the dole to displaced workers – but I see the start of a nasty downward spiral here,” commented Mr Stulen.