The Queensland Resources Council (QRA) has published a survey that shows that all coal producers expect to cut costs in response to the increase to the royalty rates recently announced in the State Budget.

 

The survey shows that cost-cutting measures will include reducing employee and contractor numbers, cutting rail and port costs and cuts to exploration expenditure.

 

QRC’s Chief Executive, Michael Roche, said the increase to the State’s royalty rates come at an inopportune time when the industry is already under strain from the high Australian dollar, rising labour costs and falling commodity prices.

 

“The combination of 30 percent company income tax and the new royalty rates will mean Queensland will carry an effective taxation rate of 50 percent on a typical coking coal operation,” said Mr Roche.


“This gives us the dubious honour of being the highest taxing coal jurisdiction globally.

 

“This effective royalty rate will increase each year if the coal royalty thresholds are not indexed.


“In the absence of coal royalty thresholds being indexed, the resultant bracket creep will mean that the government's promise not to increase royalties again for 10 years cannot be delivered.”

 

Mr Roche admitted that much of the pressure was cyclical, the sector would soon face serious systemic troubles if the rate of taxation remained high.

 

“While this sector intends to be here for the long term, governments—federal, state and local—can't take for granted that resource companies can continue to absorb increasing costs and constantly changing goal posts,” Mr Roche said.