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Progressive think tank The Australia Institute claims New South Wales could have doubled its coal revenue this financial year, if it had adopted the Queensland royalty system.
Key points:
- The Australia Institute wants the NSW government to increase coal mining royalties
- NSW Minerals says that would risk investment and the sector had seen record royalties paid this year
- Both major political parties say they will not increase the rates if they form government
Last year Queensland introduced higher royalty rates in a bracket system, which led to a higher percentage paid on coal that attracted premium prices.
Royalties are taxes paid back to governments in exchange for the right to extract coal and other resources.
In 2021, 164 million tonnes of coal was exported from NSW, where the maximum royalty rate is 8.2 per cent for open cut mines.
For underground and deep underground coal, the rates are 7.2 and 6.2 per cent, respectively.
But in Queensland, coal companies now pay higher rates, up to 40 per cent, when prices are booming, "to ensure Queenslanders receive a fair return".
"This is estimated to generate additional royalty revenue of around $1.2 billion over the four years ending 2025–26," the Queensland government predicted in treasury estimates.
The Queensland rates, outlined below, show the percentage of tax paid on each dollar of coal that fits into each bracket per tonne.
Coal price | Queensland rate |
|---|---|
Up to and including $100/t | 7 per cent |
$100–$150/t | 12.5 per cent |
$150–$175/t | 15 per cent |
$175–$225/t | 20 per cent |
$225–$300/t | 30 per cent |
More than $300/t | 40 per cent |
Source: Queensland government
The Australia Institute's research director, Rod Campbell, said Queensland's tiered approach was "sensible" and the next NSW government should follow suit.
"Had NSW done the same, we estimate the difference would have been — compared to the current royalty system — somewhere between $4.2 and $6.2 billion [this financial year]," Mr Campbell said.
"It's a serious amount of money."
Mr Campbell said he would like to see that revenue put back into transitioning the state's mining workforce.
"All of those jobs are going to have to disappear in the next couple of decades," he said.
"That [revenue] could have been put into early retirements, retraining, payouts, and ensuring that absolutely nobody unwillingly lost a job in the coal industry in NSW."
Coal price slips to two-yearly lows
Coal prices out of Newcastle hit highs of nearly $460USD/tonne ($688AUD) in September 2022 and have just fallen below $200USD ($300AUD) per tonne for the first time since January 2021.
NSW Minerals Council CEO Stephen Galilee rejected the need to increase rates.
"The Australia Institute is calling for increased royalties to be imposed on the coal sector because they want to hurt the coal sector," he said.
"They are hiding behind the facade of the need to fund a transition when what they're all about is imposing additional cost burdens on the industry to reduce its competitiveness, to make it more difficult to operate coal mines in NSW, and to ultimately shut them down."
Mr Galilee said coal royalty rates for NSW were on par with the rest of the world and that when coal prices were higher more returns were naturally made.
"The rate means that when the prices go up, the royalty revenue to the people of NSW goes up, and when prices fall it falls correspondingly," he said.
"We've just delivered record royalty revenue for the budget and the people of NSW in this financial year at around $5.5 billion this year alone.
"Queensland is well and truly an outlier when it comes to global coal royalty rates."
He said higher rates could also risk investment.
No movement from major parties
Both major parties have committed to leaving royalty rates alone until at least next June, when the federal government's price cap on coal expires.
"It's a responsible, mature approach and it also recognises that we are paying record royalties now under the existing arrangements," Mr Galilee said.
"Prices have fallen nearly 50 per cent over the past 20 months, so coal prices go up and they go down and they are falling at the moment."
Mr Campbell said beyond the rate freeze, it would not be too late for the next NSW government to review the royalty rates that have been in place for 15 years.
"The coal industry is on the way out and we should be getting as much money out of it as possible for the people of NSW rather than for multi-national coal companies," he said.
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