Queensland government’s controversial coal tax expected to rake in over $10b

Royalties are projected to almost double in Queensland driven by the Palaszczuk government’s controversial super profits tax hike.

Queensland Premier Annastacia Palaszczuk. Picture: NewsWire / Sarah Marshall

Coal royalties are projected to almost double to $10bn in Queensland this financial year, driven by the Palaszczuk government’s controversial super profits tax hike.

The windfall from the new royalties’ regime, which drew harsh criticism from resources companies and the Japanese ambassador to Australia when announced in June, will be outlined on Wednesday in the state government’s mid-year budget update.

In a statement previewing the results, Treasurer Cameron Dick said new projections are that coal royalties will increase to $10.698bn for 2022-23, from June budget projections of $5.480bn.

The royalty hikes, which began on July 1 and progressively increases the top rate from 15 per cent up to 40 per cent when the coal price hits $300 a tonne, is forecast to deliver an extra $2.95bn over 2022-23.

Mr Dick said the royalties – which at their top rate are the highest in the world – were further fuelled by the rising worldwide coal prices in the face of the Ukraine war and energy crisis in Europe. “The distortion of global energy markets has resulted in coal prices remaining higher for longer than anticipated in the budget,” he said

“The premium thermal coal spot price has also risen above hard coking coal spot prices for the first time on record.

“Ongoing weather disruptions in NSW constrained supply, contributing to price pressures.

“Further, several European countries announced plans to increase coal-fired power generation, to reduce reliance on Russian natural gas.”

Royalties from gas for 2022-23 are also $601m higher than forecast in June, and $1bn higher over the forward estimates.

Mr Dick said coal prices are expected to return to normal “beyond the current financial year’’.

“As coal prices return to more normal levels beyond the current financial year, the dividend from the new tiers is forecast to fall accordingly, delivering an average $153m each year across the remaining three years of the forward estimates,’’ he said.

The surprise budget announcement of a new royalties system came after a decade-long freeze and repeated promises from Mr Dick during the 2020 state election campaign of no new or increased taxes.

The state government has faced a well-funded campaign from the Queensland Resources Council to abandon the new coal royalties regime, with claims it is damaging future investment while discouraging trade with major international players.

QRC chief executive Ian MacFarlane previously told The Weekend Australian the tax would be “disastrous” for producers and make them uncompetitive on the global stage. “The level of the royalty is completely out of whack with everything else,” Mr MacFarlane said.

In response to the QRC’s $40m anti-royalty campaign, Queensland Premier Annastacia Palaszczuk refused to attend its annual event in November, and ordered her ministers to boycott the industry forum, admitting she was “angry” and “disappointed” by the QRC’s actions.

Japanese ambassador to Australia Shingo Yamagami also heavily criticised the Queensland government’s royalty hike, saying there had been no consultation before the rise, with the announcement sending “shockwaves through Tokyo”. “The future of the successful partnership between Japanese businesses and Queensland, as a competitive investment destination, could be at great risk,” he said.

Despite the ongoing criticism, Mr Dick said the windfall would be spent in regional Queensland.

“We’ve already said the $1.2bn we had initially forecast for the new royalty tiers would go to regional Queensland hospitals, including a new hospital in Moranbah and hospital upgrades for Mackay and Townsville,” he said. “We’ll also put aside $3bn in a long-term asset held by the Consolidated Fund, dedicated to future infrastructure in regional Queensland.”