Mining boom no barrier to Queensland GST grab

Treasurer Cameron Dick says forecasts will show Queensland will hit the so-called ‘McGowan floor’ next year.

Cameron Dick says he will support the ‘no worse off’ guarantee, which ‘is an important mechanism for other states’. Picture: Steve Pohlner

Queensland could become the second state allowed to keep a greater share of GST revenue during a mining boom.

Treasury forecasts, to be released in Queensland’s budget on Tuesday, show soaring coal prices will trigger a collapse in the state’s GST distribution next year.

The federal government divides GST revenue between states and territories to ensure each jurisdiction can provide comparable services, taking into account their abilities to raise revenue from state taxes such as stamp duty, payroll and mining royalties.

A 2018 deal struck by then-West Australian premier Mark McGowan and the previous ­Coalition government introduced a new floor price, meaning every state must receive 70c for every dollar of GST they contribute in 2022-23 and 75c in 2024-25.

The special deal has helped WA’s Labor government deliver successive budget surpluses when other jurisdictions are battling surging post-Covid debt.

Queensland Treasurer Cameron Dick, who will deliver his fourth budget on Tuesday, says forecasts will show his state will hit “the McGowan floor” next year.

“So if we get a further uplift in coal royalties, because prices stay high or increase again, we would get to keep all of that,” he said.

“We don’t think it will remain near the 70 per cent floor long term and the Commonwealth Grants Commission averages the share over three years.

“But when we think about our royalties, it’s good to have that confidence, knowing that when we do get a big uplift, ­because of either price change or policy change, we won’t be penalised for that.”

Booming coal prices and the Queensland government’s controversial royalty scheme – which includes the highest mining tax rates in the world – is delivering an estimated $13bn in revenue this financial year and an expected record operating surplus in Tuesday’s budget.

The introduction last year of three new tiers of royalty rates on soaring worldwide coal prices has produced a turnaround in fortunes for the government, which had predicted a $1bn operating deficit for this financial year.

The Commonwealth Grants Commission averages the share of GST over three years, so coal prices would have to remain high for Queensland to reap full rewards of the WA deal.

The controversial 2018 agreement, designed to protect WA after its share of the GST pool fell to just 30c in the dollar, assumed iron ore prices would eventually drop and WA’s share of the GST pool would increase.

But prices skyrocketed, allowing the resource-rich state to continue reaping huge royalty windfalls without losing out on its slice of the national tax.

The previous government also introduced a safety net to ensure other states and territories would be no worse off under the deal, requiring top-up payments from outside the $80bn GST pool.

A CGC report, released in March, estimated the cost of the GST distribution deal would be $4.4bn this financial year and rise to $5.6bn in the 2024 financial year.

The “no worse off” guarantee is due to expire in the 2026 financial year, and Mr Dick said there would be “significant discussions” at national cabinet about its extension.

“You won’t hear me attacking the McGowan floor, but you will hear me supporting the ‘no worse off’ guarantee, which I think is an important mechanism for other states,” he said.

Victoria, NSW and other states have been lobbying for the GST distribution deal to be unwound, with South Australian Treasurer Stephen Mullighan labelling it “the greatest act of vandalism in our federation’s history”.

“We have given billions of dollars to one state over every other state and territory, and it’s happening at the same time they are having one of the biggest mining booms they have ever had,” he said this month.

“It’s the only state that’s been able to deliver budget surpluses and amounts of largesse to its community the likes of which all of us would only ever dream of.

“And that’s because they’ve got this incredibly unfair revenue-sharing deal.”