![File photo of coal stacked at a Whitehaven Coal mine outside Narrabri, Australia](https://media.guim.co.uk/fc9fcc4c408399e9afcb1df2e2ae6ba882036abf/0_0_2646_1588/1000.jpg)
New South Wales could erase its budget deficit twice over by following Queensland in implementing a tiered mining royalties scheme that taxes resources companies based on windfall profits, according to an expert analysis.
But despite the potential for a more than $20bn boost to the state’s economy, neither major party says it has any plans to capitalise on record prices that have seen the value of coal exports more than double in the past year.
In June, the Queensland Labor government announced a dramatic overhaul of mining royalties in the state by introducing three new trigger points based on skyrocketing coal prices.
Under the system, which has been subject to fierce criticism from the mining sector, companies are charged 20% when coal prices are $175-$225 a tonne, rising to 40% when the coal price exceeds $300 a tonne.
It has prompted calls for NSW to follow suit. The state currently charges a flat rate of 6-8% based on what type of mining method is used, and Rod Campbell, an economist at progressive thinktank the Australia Institute, said it was “madness” for the state to not consider a higher tax burden.
“This is absolute textbook economics on what you should be taxing,” he said.
“You should be taxing the things you want less of – fossil fuel production – and you should tax higher when profits are over and above a normal return to capital.”
The war in Ukraine has seen the global price for coal sit at record prices for months.
According to the Australian Bureau of Statistics, national coal exports in 2020-21 were worth $39.2bn. In 2021-22 that had risen to $109.7bn. At the June budget, NSW revised up its expected intake from coal royalties by $3.8bn or about 52% over the four years to 2025-26 thanks to surging demand.
But according to analysis by consultancy firm Climate Energy Finance, NSW could have recouped an extra $23bn in royalties this year if the treasurer, Matt Kean, had followed the Queensland government’s lead in overhauling mining royalties.
In an analysis published last month, the CEF director, Tim Buckley, estimated that based on the current thermal coal spot prices, NSW could be in a budget surplus in the next financial year.
Calling it “a massive missed opportunity for NSW taxpayers”, he said the state was in a better position to benefit from soaring coal prices thanks to record thermal coal spot prices.
“We’re in a period where the world is being smashed by hyperinflation in fossil fuels and yet a small number of fossil fuel-exporting companies are making windfall gains on back of Putin’s invasion of Ukraine,” he said.
“The NSW budget deficit is around $11bn. They could wipe that out and still have [billions] to spend on communities that need to transition away from coalmining.”
While he conceded current prices were not likely to last long term, the ongoing war in Ukraine coupled with the likelihood that sanctions on Russia could continue well into the future meant higher global demand for thermal coal was unlikely to abate.
“NSW could stand to be huge beneficiaries from that, but instead we’re seeing foreign multinationals being the main winner,” he said.
Currently neither side of politics has shown any appetite to follow Queensland.
The Coalition has indicated it will not follow suit, and this week the opposition leader, Chris Minns, ruled out adopting the same policy if Labor forms government after the March election.
“We’re not proposing that as a policy response in NSW,” he said.
“It’s important to note that we’re already the highest taxing state of any jurisdiction in any part of the country … we need to make sure that we’re not putting added burden on business or the economy at a fragile time.”
Queensland’s new royalties scheme caught most pundits by surprise when the state’s treasurer, Cameron Dick, announced it in his June budget. Amid record coal prices, he said, the “progressive royalty tiers” would ensure “people of Queensland also receive a fair share of those windfall proceeds”.
It quickly sparked backlash from the industry, and shortly after the Queensland budget was released, the Whitehaven Coal managing director, Paul Flynn, warned against NSW following suit even amid soaring profits.
“We will be making sure that NSW government leading up to the election in March next year understands the critical role the resources sector plays in NSW,” he said at the time.
Whitehaven last month posted a record $2bn net profit for the 2021-22 financial year.
The CEO of the NSW Minerals Council, Stephen Galilee, said increasing the current rate would hurt investment in the state.
“Mining royalty payments in NSW are already at record levels, reflecting strong commodity prices,” Galilee said.
“Mining royalties are just one of many taxes paid by mining companies as well as corporate tax, payroll tax, land tax and many other fees, charges and levies, and coal royalty rates in NSW are already double those for other minerals.
“Imposing a Queensland-style royalty increase in NSW would only deliver a short-term revenue gain, while inflicting great damage to the reputation of NSW as a place to invest.”
But the Greens upper house MP Sue Higginson called it a “missed opportunity” for NSW, saying a higher royalty rate could be used to fund “the inevitable transition of coal jobs”.
“The clean-up costs for climate-induced disasters such as the March floods are being borne by the residents of NSW while corporate mining interests are making ridiculous profits off the back of a war in the Ukraine,” she said.
“Queensland has shown that we can and should make fossil fuel corporations pay their fair share when it comes to profits made at the expense of everyday Australians. NSW should take advantage of this spike in fossil fuel profits to better prepare ourselves for the billions we will need as we go from one climate disaster to the next.”