Coal tax hike ‘hurting Japan ties’

Billions of dollars of future investment into hydrogen and critical minerals in Australia may be at risk after the Palaszczuk government hiked its coal royalty tax to 40 per cent.

Japanese ambassador Shingo Yamagami. Picture: Nigel Hallett

Billions of dollars of future investment into hydrogen and critical minerals in Australia may be at risk after the Palaszczuk government hiked its coal royalty tax to 40 per cent, with Japanese ambassador Shingo Yamagami saying foreign investors were “yet to see any glimmer of hope” that the hike be wound back.

Mr Yamagami on Wednesday will say the tax hike has damaged Australia’s trading relationship with Japan, with the fallout extending beyond the coal sector to vital new areas of co-operation including a shift towards cleaner energy sources and to reduce carbon emissions.

In a virtual address to Queens­land Resources Council’s annual State of the Sector forum in Brisbane, Mr Yamagami will tell resources companies they are the “bedrock” of the nations’ trade relations, which has built up over several years and is based on “mutual trust”.

“Japanese companies’ eagerness to collaborate with their Australian counterparts in resources is underpinned by trust in Australia as a safe and reliable place to invest,” he will say.

“This is why decisions like the Queensland government’s coal royalty hike carry so much potential risk. It could have impli­cations beyond Queensland or the coal industry, affecting Japanese investment in joint ventures such as the hydrogen hubs.”

Queensland increased the top coal tax royalty rate from 15 per cent to 40 per cent in the June state budget, triggering anger within the resources industry.

The QRC is preparing to launch on Wednesday a two-year multimillion-dollar anti-mining tax campaign amid concern the tax would be “disastrous” for producers and make them uncompetitive on the global stage.

The Weekend Australian revealed the campaign would cost about $40m, with QRC chief executive Ian MacFarlane saying the sector was prepared to do “whatever it takes” to force a wind-back. The state’s tax rate is the highest in the world, compared with Canada (15 per cent), Colombia (10 per cent) and South Africa (7 per cent).

Mr Yamagami told The Australian the Queensland government did not consult with Japan prior to the tax being imposed.

“What we have been asking the Queensland government is to consult fully with Japanese businesses,” he said.

In his speech, Mr Yamagami will say Queensland has the potential to become the “epicentre” of Japan’s investment into hydrogen and critical minerals as it transitions to cleaner energy, but only if investors’ “long-nurtured trust is maintained”.

“The importance of securing critical mineral supply chains is only going to grow, especially given the essential role of minerals such as cobalt and lithium in the global decarbonisation effort,” he will say.

“Looking to the future, emissions reduction will certainly be one of if not the main driver of Japan-Australia co-­operation, especially when it comes to ­resources.”

Mr Yamagami will on Wednesday emphasise the importance of the trade relationship with Japan in the face of emerging challenges to global supply chains and heightened energy ­security concerns.

He will also endorse the ­memorandum of understanding on critical minerals co-operation that was signed between the two countries.