The Queensland Budget 2022-23 has been announced, with almost $80 million in funding for the state’s resources sector and new coal royalty tiers as a decade-long royalty freeze comes to an end.
Resources Minister, Scott Stewart, said the $79.6 million department budget would help grow and diversify the resources industry into the future with a focus on good solid jobs and projects in Queensland’s emerging new economy minerals sector.
A key investment is $40 million over four years, and an ongoing $10 million a year to improve the productivity of Queensland’s land resources and support regional jobs.
Mr Stewart said the budget continued the Queensland Government’s long-standing commitment to driving exploration, increasingly focusing on the new economy minerals needed for renewable energy and advanced technologies.
“Exploration is the lifeblood of new resources projects and jobs, and its essential we continue to support exploration, including with free access to first-rate geological data,” Mr Stewart said.
“The latest statistics show that exploration is going strong in Queensland, with exploration expenditure up to $726.5 million in year to March, up 3.1 per cent on the same period a year ago.”
Mr Stewart said the 2022-23 State Budget will continue to drive exploration and the next generation of good jobs and projects for the resources sector through:
- $17.5 million over four years for grants to explorers under the Collaborative Exploration Initiative, supercharging the search for new economy minerals
- $10 million over two years for airborne and ground-based geophysical surveys
- $5 million over two years for research to better define Queensland’s new economy minerals potential
The budget also provides:
- $5.7 million over three years to add a future industries delivery hub to the existing Resources Centre of Excellence in Mackay
- $1.6 million to streamline the assessment of applications to mine and explore
Mr Stewart said Queensland’s ongoing economic recovery also hinged on the state’s land resources and maximising their sustainable productivity.
“This budget provides $40 million over four years, and an ongoing $10 million a year, for a Natural Resources Recovery Program,” Mr Stewart said.
“This will allow the department to support better, sustainable productivity, and jobs, from Queensland’s land resources.
“Despite flooding rain across parts of the state, almost 45 per cent of Queensland remains drought-declared.
“In 2022-23, the government will continue to back our drought-stricken food and fibre producers with $3.2 million in land rent relief.”
Coal royalty increases
New progressive royalty rates for Queensland coal will support new investment in regional hospitals, reflecting unprecedented pricing and revenues being collected by multinational coal companies.
Treasurer, Cameron Dick, said the change follows a ten-year royalty freeze for coal royalties, the longest pause in royalty arrangements in modern Queensland history.
“Multinational coal companies have enjoyed an extraordinary period of stability in Queensland’s coal royalty regime, thanks to the Palaszczuk Government’s extended freeze on coal royalties,” Mr Dick said.
“However, with the freeze expiring on 30 June 2022, the existing rates do not account for the unprecedented windfall prices that coal producers are now receiving.
“Our existing coal royalty tiers were primarily designed for lower coal prices, with a top tier at $150 per tonne, with royalties charged at 15 per cent.
“However, with coal recently trading at over AU$500 per tonne, our current rate structure is clearly no longer fit for purpose.”
Mr Dick said that, to reflect the new price levels being achieved, three new progressive coal tiers would be introduced on 1 July 2022.
The new rates will be 20 per cent for prices above AU$175, 30 per cent for prices above AU$225, and a 40 per cent tier that would apply when prices exceed AU$300.
“Importantly, the higher tiers only take effect on the portion of the royalty price above the relevant price,” Mr Dick said.
“For example, if coal prices are AU$302 per tonne, a very high price by usual standards, the 40 per cent tier will only apply to the $2 portion.”
Mr Dick said the new progressive royalty regime will minimise impacts on the coal industry.
“Based on export values and volumes over the past ten years, average prices for hard coking coal – the metallurgical coal used for steelmaking – have exceeded the new tier of AU$175 per tonne for only half that time, while average thermal coal prices have only exceeded AU$175 in recent months, for the first time ever,” Mr Dick said.
“These changes mean coal producers can rest easy knowing they will not be hit with higher royalties when prices are low and the industry is struggling.
“Importantly, during period of low prices, Queensland royalty rates will be lower than those charged in New South Wales.
“This compares to the 2012 change by the LNP, which increased existing rates in 2012, when prices were falling.”
Mr Dick said the royalties will be invested in delivering better infrastructure for regional Queensland.
“The budget provides more than $4 billion dedicated to hospitals in regional Queensland, including a new hospital for Moranbah, and major expansions for Mackay, Townsville and Cairns,” Mr Dick said.
“These changes will mean more money to regional Queensland, instead of flowing interstate or overseas as windfall profit.”
Queensland mining sector reacts to coal royalty increases
The Queensland mining sector has reacted to the announcement of coal royalty increases, with Tania Constable, Chief Executive Officer of the Minerals Council of Australia, saying mining investment and regional jobs in the state are at risk following the announcement “of a blatant resources royalty grab on an industry that has for years been paying more than its fair share of tax”.
“This extraordinary 40 per cent royalty on revenue together with Australia’s 30 per cent tax on profit makes Queensland the highest taxing mining jurisdiction in the world. This is unacceptable,” Ms Constable said.
“This tax grab is short-sighted and counterproductive over the long term and has the potential to scare off investors in all commodities.
It will not only impact thousands of direct mining jobs but also thousands of small “businesses and many communities that support mining.”
Ms Constable said mining investment and jobs should not be put at risk through any move to increase the already high tax burden on the industry.
“Mining operations are the backbone of many regional Queensland towns, providing employment, opportunity and a sense of community,” Ms Constable said.
“Everyone across Queensland benefits immensely from successful mining operations from jobs right through to paying for services such as hospitals and schools.
“Stable and internationally competitive tax regimes are critical to ensuring mining investment continues to grow and deliver further benefits for all Queenslanders.
“Australian mining consistently pays amongst the highest tax in the world including company tax, royalty receipts and payroll tax to federal, state and territory governments.
“The system works as more royalties and company tax are delivering to the people of Australia – over $39 billion in 2019-20 and will go higher.”
Ms Constable said, in the period 2010-11 to 2019-20, Australian mining paid $106 billion in royalty taxes and $132 billion in company taxes – 30 per cent of all company tax paid in that period.
“While Australia has an established comparative advantage in mining exports, future investment in new mining and minerals processing operations is not guaranteed,” Ms Constable said.
“The mining industry faces significant competition from emerging mining regions in Africa, as well as traditional mining centres in South America and Canada to attract investors.
“The decision by the Queensland Government was made despite assurances prior to the last state election that there would be no new or increased taxes that could undermine investment in the sector.
“Equally disappointing was that the industry was not consulted on the proposed hike in royalties; a process that is critical for a change that will impact the sector.”
The Queensland Resources Council (QRC) also spoke up after the announcement, saying the Queensland Government’s decision to impose the world’s highest royalty taxes on the resources sector will hit regional communities and businesses hard, as companies are forced to rethink their future investment and employment plans.
QRC Chief Executive, Ian Macfarlane, said the industry is reeling from the addition of an extra three tiers of royalty taxes on coal, representing a huge cost increase to producers based on current prices.
“This decision from the government will have a flow-on effect on the cost of living through higher electricity prices, higher construction costs and higher-priced consumer goods that will add to inflation and impact every Queenslander,” Mr Macfarlane said.
“This is a seriously misguided economic policy that will make Queensland’s number one export industry and private sector employer less internationally competitive.”
Mr Macfarlane said the decision to increase royalty taxes to fix a hole in the budget is a short-term, political move with long-term consequences for a major, wealth-creating sector of the Queensland economy.
“This tax grab has been developed behind closed doors and without consultation with industry. It’s a kick in the guts and not a fair deal for the resources sector, which has kept the Queensland economy afloat during the pandemic by supporting jobs and businesses throughout the state,” Mr Macfarlane said.
“Regional resources communities have every right to ask this Government why their jobs and the economic prosperity of their towns should be put on the line for the sake of a short-term budget fix.
“The Queensland resources sector already pays the highest royalty taxes in Australia, double that of NSW, and will now pay the highest rates in the world.
“Under the existing arrangements, as our commodity prices go up, so too do the royalties we pay into the state budget, which means every Queenslander benefits from our prosperity.
“That’s why this year, royalty taxes paid by the coal industry is an all-time record and four times last year’s payments.”
Mr Macfarlane said resources companies are just like any business – higher taxes mean less profit, which means less investment and fewer jobs in the future.
“What the government also isn’t telling people is that because of the GST equalisation process, 80 per cent of the extra royalties raised will be redirected to Canberra over the next five years anyway.
“So, the net economic benefit for Queensland will be minimal but the potential damage to our industry and the Queensland economy could be major.”
Mr Macfarlane said Queensland’s resources sector contributed a record $84.3 billion to the state economy last financial year through the flow-on effects of industry spending. It also supports the jobs of more than 422,000 people.
“Resources employees – who earn the highest, average income out of any sector in Australia – all pay income tax as do the 15,000-plus businesses in our sector’s supply chain. Resources companies are also Australia’s biggest company taxpayer,” Mr Macfarlane said.
“In total, this financial year, Queensland’s resources sector will pay more than $8 billion in royalty taxes into the state budget because of higher commodity prices, which is more than three times the amount companies paid last year.
“That’s why we say ‘when the resources sector is doing well, so is Queensland’, because the amount of royalty taxes our industry pays into the state budget goes up when prices go up – that’s how the system works.”
