THE State Liberal Opposition has called for an urgent inquiry into the crisis facing Tasmania's 170 forest contractors, amid growing concerns about the downturn in the timber industry.

Liberal leader Will Hodgman said yesterday it was vital to understand the problems and develop solutions to help the Tasmanian forest contracting community.

During the past year, contractors have had their log harvesting deals either axed or cut by up to 50 per cent, throwing large sectors of the timber industry and its suppliers into financial difficulty.

The industry believes twice as many forest harvesting businesses now hold contracts with major timber exporters Gunns Ltd and Forestry Tasmania as are actually needed to supply current levels of demand.

Mr Hodgman regards a top-level taskforce as essential to properly examine the social and economic impact of the downturn in Tasmania's export woodchip market.