New plantings, which peaked at 98,000 hectares in 1994, are now at their lowest level since 1960.

In an annual review of forest planting, the Agriculture and Forestry Ministry estimates that 6000ha of new forest land and 32,000ha of harvested land were planted last winter.

This is well below the 10,600ha and 40,600ha planted in 2004.

Forestry land will decline if commodity prices remain in a downturn and the Government does not alter its climate-change policy, Forest Owners' Association chief executive David Rhodes says.

"If nothing changes, forestry will continue to struggle."

The lower planting rates confirmed that the Government climate-change policies relating to forestry needed to be overhauled, he said.

"New Zealand is relying on a growing area of plantation forestry to provide a carbon sink, locking up greenhouse gases produced elsewhere in the economy.

"In fact, the forested area has declined, partly because of the Government's Kyoto policies."

The ministry review estimates that 7000ha of the 39,000ha harvested last year was deforested.

But the downturn in agricultural commodity prices could yet act in forestry's favour, Mr Rhodes said.

The competition for land by a strong agriculture industry could become more subdued and allow forestry to make some recovery.

Forestry owners want to be involved before the climate-change policy is announced next month.

Mr Rhodes said they wanted the Government to support the industry by at least paying for services relating to climate change. Wood from forestry trimming could act as a substitute for the burning of fossil fuels for domestic heating. It had to be recognised that this would reduce carbon in the atmosphere.

Forest owners were also promoting forestry's benefits to stabilise water quality, protect lakes and rivers from nitrogen and phosphate pollution, prevent soil erosion, and reduce the huge costs to the taxpayers of floods.

"The Government needs to look at plantation forestry as an asset with multiple values to society," Mr Rhodes said.

If growers were rewarded only for its value as a cash crop, taxpayers would end up paying for the environmental costs of land-use conversions, he said.

Declining forestry areas are not expected to affect employment in the short term, because of high planting rates from the 1970s to 1990s.

However, forest owners say that deforestation is putting at risk important conservation values, such as protecting hillsides from erosion and reducing flooding.