Opinion: Qld coal royalties scheme an existential threat to the industry
Queensland’s onerous coal royalty regime is nothing less than a resources rent tax in disguise, writes Dimitri Burshtein.
The recent decision by BHP to cut 750 jobs in its Queensland coal operations, mothball a mine and consider shutting a skills and training academy is more than just another corporate cost-cutting exercise. It is the inevitable consequence of a state government that has chosen to pluck the golden goose until it screams.
Queensland’s coal royalty regime, designed to escalate as coal prices rise, is nothing less than a resources rent tax in disguise, engineered to extract maximum revenue from companies like BHP, but with little thought given to the long-term consequences.
The scheme was introduced by the former Labor government in 2022, but the current Liberal National government has happily kept the framework in place. Why? Because the state budget is in such dire condition that it cannot afford to relinquish the cash.
The royalty scheme design mirrors the flawed spirit of the Rudd federal Labor government’s minerals resource rent tax that another Queenslander, then treasurer Wayne Swan, tried – and failed – to impose more than a decade ago.
Under the old three-tiered Queensland system, royalties were set at 7 per cent up to $100 a tonne, 12.5 per cent between $100 and $150, and 15 per cent above $150. But then came Labor treasurer Cameron Dick’s “improvements”. Three new tiers were added: 20 per cent at prices above $175 a tonne, 30 per cent above $225, and an eye-watering 40 per cent above $300.
The government congratulated itself on its cunning design, but it was a Pyrrhic victory. Queensland’s Treasury might have pocketed billions during the recent coal price boom, but now that cycle is turning, the burden falls on jobs, investment, and the state’s reputation as a place to do business.
For comparison, New South Wales maintains a flat royalty rate of 10.8 per cent on open-cut coal, only recently increased from 8.2 per cent.
While NSW has its own problems, sovereign risk associated with the notorious 2014 decision by Barry O’Farrell’s Coalition government to strip NuCoal Resources of its exploration licence without compensation or due process, its royalty structure is at least predictable. Queensland’s is opportunistic.
One government punishes miners through arbitrary seizure of property rights; the other does it through punitive taxation. Both erode confidence in Australia as a safe and reliable jurisdiction for investment.
The political response to BHP’s announcement only deepens the sense of unreality. Deputy Premier Jarrod Bleijie declared that BHP had an “obligation” to support the 750 workers who would lose their jobs.
But Bleijie should acquaint himself with the Australian Corporations Act, which requires BHP’s directors to act in the best interests of the company, not the Queensland government. The role of BHP’s board is to preserve shareholder value, not to prop up a state budget made unsustainable by reckless policy choices.
Bleijie also claimed that BHP had made “billions of dollars from the resources owned by Queensland taxpayers”. What he failed to mention is that those same taxpayers have also made billions – through royalties, payroll tax, GST, land tax, and the broader economic activity generated by the resources sector.
The relationship between government and industry is not parasitic; it is symbiotic. Pretending otherwise is either wilful ignorance or cynical politics.
The deeper problem is that Australian governments increasingly view private enterprise not as a partner in wealth creation, but as an inexhaustible vein to be mined. The purpose of a business, however, is not to maximise government tax receipts. It is to generate returns for its shareholders while providing goods, services, and employment. Taxes are a by-product, not the mission.
Jean-Baptiste Colbert, finance minister to Louis XIV, famously observed that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” Queensland has attempted precisely that with its coal royalties.
But instead of silent compliance, it now finds itself the one doing the hissing as jobs vanish, investments are shelved, and the very revenue streams it hoped to fatten begin to thin.
What BHP’s announcement demonstrates is simple: when governments treat businesses as little more than revenue streams, businesses eventually push back. Sometimes that pushback comes quietly, in the form of deferred investment. Sometimes it comes loudly, in the form of mass job cuts and shuttered projects. Either way, the message is the same. You cannot keep punishing the goose and expect an endless supply of feathers.
Dimitri Burshtein is a senior director at Eminence Advisory
