But even a lifetime ago, he would warn Ken to go in another direction, to stay away from logging.
“This industry has no future,” Henry recalls he and his brothers were often told by his father. “It was just a slow-moving train wreck.”
Ultimately Henry, the economist, became Australia’s most powerful bureaucrat, marked by a long-serving stint as Treasury secretary working under both John Howard and Kevin Rudd. After retiring from Canberra, he became the chairman of National Australia Bank although his tenure there was cut short by the shake-out of the Hayne royal commission.
But even as Treasury boss, Henry often wore his green credentials on his sleeve.
The Treasury boss took leave just as the world was rushing headlong towards the Global Financial Crisis to go bush and save the endangered northern hairy-nosed wombat. His farm outside Canberra doubled as a wildlife refuge.
Now Henry is working on an ambitious plan to save the nation’s native forests – but this approach is based on pure economics. And the plan involves growing Australia’s forest industry just as much as preservation.
For his mind it comes down to the way state-based hardwood forests are managed. That’s mostly pulling out trees at a loss to make low-value products like woodchips or pulp.
“The present business model, that makes no sense at all – it’s a loss-making business,” he tells The Australian. The solution is right in front of us, he says: to use existing forests as a “carbon sink”.
The first part of the problem is recognising the problem. This involves developing a coherent strategy to manage the competing commercial and preservation interests for the entire timber industry. Much comes down to different state-based management, while native forest logging has been phased out in Victoria and Western Australia.
The last such agreement was negotiated between the commonwealth and the states three decades ago. It was thrashed out before the existence of carbon markets and before there were increasing demands for bushfire resilience. There were less housing-demand imports at the time and much more domestic volume, as well as capacity for milling.
Henry was speaking following the recent release of his Forest Futures position paper. This document is built around a hard-nosed economic approach to managing the nation’s forests. The paper was funded by The Australian Climate and Biodiversity Foundation, a body that Henry now chairs. Other board members include former Business Council of Australia boss Tim Reed and influential Macquarie Group agribusiness executive Liz O’Leary.
Henry highlights that the Forestry Corp of NSW, the biggest of the state-based agencies in Australia, lost $29m last year alone on its hardwood or native operations. The value of the state’s native forests have now been written down to zero, he adds.
Instead of being earmarked for selective logging, the smarter bet is to use the state’s remaining two million hectares of native forests to store carbon.
The carbon credits, overseen by the Clean Energy Regulator, would create a sustainable funding stream for more sophisticated forest management, including resilience programs for bushfire prevention. It also delivers investment in expanding hardwood and softwood plantations.
Growing the plantation part of the industry is essential to keeping sawmills with enough volume so they too can remain efficient.
“Instead of taxpayers footing annual bills to subsidise the logging of native forests or woodchips, the native forests could actually be a profit centre to be used for carbon sequestration,” Henry says.
The Future Forests study calculates this approach to managing native forests could generate $1.5bn in revenue over 15 years in NSW alone. This could support 1700 jobs if the funds were reinvested in forest management.
Henry reckons even this is a highly conservative estimate of the potential. But it means native forests go from a net cost to the taxpayer to something that can be preserved and generate value.
He says around 75 per cent of what comes out of native forests and hardwood timber plantations is principally timber for woodchips and firewood. “That’s very low value. We should be capable of having a timber industry that supports construction,” he says
It means Australia is missing out on booming engineered wood products, including laminated veneer wood, plywood and floorings. These are the highest value wood and Australia is almost entirely reliant on offshore manufacturing, importing hundreds of millions of dollars worth of products annually.
While Australia is talking about a future made in Australia, building out a domestic supply chain in engineered timber and housing construction can only help supply. “Demand for engineered timber has already moved in that direction – very strongly,” he says. “The architects are saying this is we want. The builders are saying this is what we want. So let’s meet that.”
The change will come at a cost, Henry acknowledges, including an upfront investment – potentially in the hundreds of millions. But this is a smaller cost than an entire timber industry disappearing altogether.
“We reckon it is much better to take the opportunity to think about how the industry can be restructured in a way that provides better jobs, more secure jobs for people, than just kicking the can down the road and pretending that there’s no problem,” he says.
Henry won’t be drawn into the election, but he sent a caution to both sides of politics that time was running out for Australia to address its problem of sagging productivity. And the timber industry is just one smaller example of this.
“Productivity performance can be cyclical, but that’s not what’s going in Australia. We’ve got a structural problem that’s pretty clear. We’ve achieved very, very low productivity relative to what we achieved in the last 20 years of the 20th century. We have not done nearly as much as we should have done in trying to figure out why it is productivity has slowed so dramatically and what we need to do in order to turn that around.”
His view is soft business investment is playing a big part and that is mostly due to Australia operating under an old world tax system. “Businesses have just not been investing in Australia for quite a long time”. The relative rate of business investment in Australia is as low as it was in the middle of the early 1990s recession. Henry reckons that’s because global businesses are increasingly looking past Australia.
“We need an attractive tax structure. In a world of globally mobile capital, we’re seen as being a bit of an old economy, still heavily dependent on non-renewable extraction and so on. “We just don’t make ourselves as an innovative new economy for people who have capital to deploy.”
Henry meanwhile, dismissed Donald Trump’s tariffs as marking an era of a “stupid world”. Escalating and reciprocal tariffs, never ends well for anyone, he warns. “It’s trade that has underpinned human development for centuries,” Henry says.
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Ken Henry is an unlikely advocate for forests. For one, he grew up in a timber family. His father logged native forests and worked in sawmills near Taree, in northern NSW.