Editor’s view: Review needed to save Qld resources industry and economy

Queensland’s economy is reliant on the resources industry, which is why today’s budget should include a pledge for a comprehensive review of the state’s botched royalties regime, writes the editor.

Queensland Treasurer David Janetzki in his office ahead of Tuesday’s state budget. Picture: Lachie Millard

Treasurer David Janetzki will today unveil his first state budget – a document we assume will map out his plans to repair the economic position of Queensland’s public sector over the next four years.

But Mr Janetzki is lucky he does not yet need to worry about the years beyond that, because the goose that has laid our golden egg has a serious case of avian flu.

Forget tourism, the reality is that Queensland’s economy has been – and will continue to be – reliant on the health of its resources industry. And that industry is showing some early signs of being seriously unwell – suffering from an infection caused by a seriously botched surgery to coal royalty rates performed three years ago by former Labor treasurer Cameron Dick.

Last week at the Townsville Bulletin’s annual Future Townsville event, Premier David Crisafulli voiced his full-throated support for the resources sector – a welcome change after years of Labor’s pig-headed ideological negligence of an industry that supports one in five Queenslanders.

But Premier Crisafulli also said he would keep in place the Dick royalties regime – one that today slugs Queensland metallurgical (steelmaking) coal miners with a tax twice what they were paying with equivalent spot prices.

The result is that many mines are now operating cashflow negative, including some of our biggest miners. In its half-year results, BHP confirmed its previous shocking statement that it would not be investing anything more to grow its operations in Queensland considering its effective tax rate is now 60 per cent.

Premier David Crisafulli. Picture: Tara Croser.

Its statement to the market last December was brutal: “Queensland remains one of the highest coal royalty jurisdictions in the world following the change to the royalty regime. Given the negative impact on investment economics resulting from the change in coal royalty rates, and the increase in sovereign risk due to the decision to raise royalties without consultation, we will not be investing in any further growth (in our Bowen Basin operations).”

But this is not just one miner’s story. Twelve years ago there was more than 440 million tonnes of coal capacity in the pipeline for Queensland. The pipeline has since halved, to 172 million tonnes.

In the March quarter of this year, exploration expenditure in Queensland fell 37 per cent. While the bad weather was a contributing factor, the $105m was less than one-fifth of what was spent on exploration in Western Australia – where the Labor government goes out of its way to support the mining industry.

In Queensland, half of the chief executives of the companies that the Resources Council represents say they are less confident about the sector’s growth prospects.

Together, these should be some seriously concerning findings for any Queensland Treasurer who is looking beyond the next four years.

And yet Mr Janetzki continues to – on the one hand – criticise his predecessor Mr Dick for imposing the royalties regime, but on the other he will today recommit to the regime staying in place.

Premier Crisafulli explains that position away by saying that to dump the new regime would be a broken promise. But he has already learned with his stadium backflip that voters are fine with political leaders breaking promises if it is for the right reasons. Today’s budget should therefore include a pledge for a comprehensive review of the royalties regime to uncover the reality of its impact – a review that would explain to Queenslanders why it needs to be overturned.