Queensland’s coal royalty tax hike will ‘reduce the competitiveness’ of the state’s coal export sector: report

The Palaszczuk government has underestimated the fallout of its coal royalty tax hike, with Queensland becoming the highest royalty jurisdiction in the world.

Queensland’s new coal royalty regime will “reduce the competitiveness” of the state’s coal export sector, according to a Commodity Insights analysis prepared for the Resources Council.

The resource-rich state increased the top coal tax royalty rate from 15 per to 40 per cent in the June budget, provoking a warning from the Japanese ambassador that companies were questioning if Queensland remained a “safe and predictable” investment destination.

Tuesday’s report, authored by Commodity Insight’s Mark Gresswell and Matt Anderson, found the Palaszczuk government had underestimated the impact of the new tax regime with Queensland becoming the highest royalty jurisdiction in the world.

“The royalty revenue forecasts from Treasury are based on extremely conservative and unrealistic, in our opinion, coal price forecasts,” they wrote.

“As a result, they massively understate the revenue collection by the government and the cost impost placed on the sector.

“The royalties also clearly reduce the competitiveness of the Queensland coal export sector relative to its competitors by sharply increasing the cost structure.”

Coal mining operations from Bravus, formerly known as Adani, at their Carmichael Coal Mine in Queensland. Picture: Cameron Laird

Treasurer Cameron Dick increased royalties in his June budget amid ­record-high coal prices and following a decade-long freeze.

He had repeatedly promised no new or increased taxes during the 2020 state election campaign.

The royalty hike was met with strong backlash from the resources industry, with BHP last month announcing it was pausing investment on a metallurgical coalmine in central Queensland.

The report found the new top royalty rate for metallurgical coal, used for steelmaking, is now 2.7 times higher than the nearest competitor and almost five times the global average.

Queensland Resources Council chief Ian Macfarlane said the government’s decision to lift royalty rates had dramatically increased companies’ production costs and harmed the industry’s ability to compete internationally for customers.

“The new royalty regime is another cost impost that will need to be absorbed if Queensland companies are to remain internationally competitive, which means budget cuts will have to be made elsewhere,” he said.

“It’s pretty simple – resources companies paying higher tax bills have less money to spend on developing new projects or expanding operations, or on rehabilitation programs, upgrading plant and equipment, investing in low emissions technology or employing more people.”

A spokesman for Mr Dick said the royalties arrangements were based on coal price modelling by Queensland Treasury.

“If prices perform higher than forecast, any additional royalties generated would only be a fraction of the record profits that coal companies would be making from the resources owned by the people of Queensland,” he said.

“Queenslanders deserve to see the benefit of high prices.

“Importantly, at current prices, Indonesian coal producers are paying higher royalty rates than companies mining in Queensland.”

The Indonesian rate cuts in at $150 while Queensland’s top rate of 40 per cent is triggered when prices reach $300.