Royalty hike a wrong choice, not a strong choice

 

The Queensland Resources Council (QRC) has called on the state government to ensure its Strong Choices campaign is not hijacked by populist sentiment that assumes higher taxes on the resources sector is the easy way to repair the state’s budget.

QRC Chief Executive Michael Roche said today the public’s reported preference for an increase in resources sector royalties to improve the budget bottom line was an instinctive but misinformed reaction given the tough economic conditions and outlook confronting the sector.

"The coal sector for example has shed over 8,000 jobs in Queensland in the face of some of the most challenging business conditions in decades," Mr Roche said.

"There can be no dispute that the best means of boosting the resources sector contribution to the state’s fiscal repair task is the pursuit of policies to promote sector growth, not a resort to job-destroying tax increases," he said.

Mr Roche said the explanatory notes accompanying the Strong Choices survey bear repeating:

"The Queensland Government increased coal royalty rates in the 2012-13 Budget and has committed to not changing the rates for 10 years. Increasing mining royalty rates at a time of lower commodity prices may impact on the national and international competitiveness for Queensland mines and will impact on jobs.

"Increasing royalties may make resources companies less competitive on the world market. Ultimately, these companies may choose to close some projects, and abandon the development of others, affecting jobs and other investment in Queensland."

Mr Roche said Queensland already has close to the world’s highest taxation rate for coal following huge royalty hikes by the Bligh Labor Government in 2008 and in Treasurer Nicholls’ first budget in 2012.

In his 2012 budget speech, Treasurer Nicholls gave an unequivocal commitment to the coal sector when he said: To give certainty to industry the government will guarantee no change to the royalty rates for coal for ten years from 1 October 2012."

The Treasurer’s commitment was reinforced by Deputy Premier Jeff Seeney on 11 September 2012:

"Coal mining is critically important to Queensland and this guarantee to keep royalties unchanged for the next decade allows companies to make investment decisions with total confidence."

"The QRC has every confidence that the Newman Government has no intention of walking away from these unequivocal commitments to fiscal stability for the coal sector," Mr Roche said today.

"Equally, there is no quick fix in escalating royalties for other resources sector industries.

"The companies behind the emerging export gas sector have invested more than $60 billion in an uncertain global market.

"A royalty increase now would undermine this huge commitment to Queensland and future investment potential.

"Similarly, the state’s metals miners whose royalties were comprehensively reviewed in 2008-09 are in no shape to absorb a further tax hit."

Mr Roche said the QRC congratulated the Newman Government on its bold and open dialogue with the Queensland community on the tough budget choices facing the state.

"The Queensland Resources Council Board has resolved that they have no objection to a program of sale or leasing of some state assets – including port and electricity assets – in order to reduce state debt to a sustainable level," he said.

"The key caveat to the QRC’s support for such a program is that it must be accompanied by a suite of appropriate commercial and regulatory protections for the users of these assets to ensure that Queensland’s core infrastructure supports the state’s competitiveness in a global market for resources.

"In relation to ports, the sector is eager to be involved in discussions around both future ownership and operation of the ports."

Mr Roche said that in pursuing any asset sale and lease program, the government should take great care to ensure that they don’t fall into the trap of opting for transactions that risk long-term detriment to the development potential of the state’s resources sector.

"To the Newman Government’s credit, this has been their overwhelming focus, typified by the Premier’s backing of the ResourcesQ partnership for a 30-year vision for the resources sector."

www.qrc.org.au

ends