Jackie Trad’s surplus at risk from mining royalties plunge

Diving mining royalties driven by a drop in the price of coal have put Queensland’s budget surplus at risk.

Queensland Treasurer Jackie Trad. Picture: AAP

Queensland’s budget surplus is at risk of being wiped out by diving mining royalties driven by a drop in the price of coal.

Treasurer Jackie Trad is ­expected to deliver her mid-year budget review on Thursday with an eye on next October’s state election.

At the June budget, the operating surplus for the 2019-20 fin­ancial year was forecast to be $189m, with coal royalties expected to deliver a $4.3bn boost to the budget bottom line.

Those figures were based on an average price for hard coking coal of $US179 a tonne and $US93 for thermal coal.

Prices have slumped since, with coking coal last week sitting at about $US135 a tonne and thermal coal at $US64 a tonne.

While Queensland coalminers generally have locked in long-term export contracts based on the higher prices, the state’s June budget papers confirm that for every 1 per cent variation in the average price of export coal, royalty revenues change $54m.

Economist and former federal Treasury official Gene Tunny, ­director of Adept Economics, said the coal price drop could easily knock out Ms Trad’s budget surplus. “We’re talking (a loss of) hundreds of millions of dollars — hopefully it’s not as much as a billion, but it’s substantial,” he said.

“That’s going to create challenges for the government because (it) is wanting to stimulate the economy, particularly in the regions.

“They’re also mindful there’s an election in October next year. We’ve seen the government has brought forward the budget for next year (to April), so this could be the first instalment of a pre-election stimulus package.”

Ms Trad is also expected to give an update about her public service razor gang, the Service Priority Review Office, established in the wake of the June budget and charged with finding $200m in cuts in the 2019-20 fin­ancial year.

Consultants PwC have been contracted to advise the government on how to cut spending on consultants, with Nicole Scurrah — a chief of staff to former Labor premier Anna Bligh — embedded with the razor gang three days a week. The SPRO has a budget of $10m over two years, and has been told to find cuts of $500m a year from 2020-21 onwards.