Queensland has addressed with clear vision the windfall war profiteering of the fossil fuel industry – and the state’s concurrent fiscal, energy and climate crises – by announcing a massive lift in the Queensland coal royalty rate on windfall gains – 40% when prices exceed $A300/t.
NSW continues to receive just scraps from its coal export industry – a flat royalty rate of just 7-8% – as the fossil fuel sector makes windfall profits, even as our most vulnerable people are smashed with the multiple consequences of rampant domestic fossil fuel energy hyperinflation and associated mortgage rate rises.
This set of circumstances further supports the case for federal treasurer Jim Chalmers to bring in a Carbon Export Windfall Tax, expanding upon the Gas Windfall Export Tax proposed this week by former Treasury Secretary Dr Ken Henry.
NSW’s loss should become our federal government’s windfall. This would help offset some of the energy hyperinflation we are all experiencing (except for Western Australia thanks to their domestic gas reservation).
Figure 1 below shows the new Queensland progressive coal royalty rates from FY2023. When coal prices are low, the industry will pay just 7% of revenues in royalties to the Queensland government.
But in an act of bravery and fiscal responsibility that will have Queensland Resources Council chief lobbyist Ian MacFarlane frothing, royalties will ratchet up to 40% for every dollar above $A300/t. It’s brilliant!
The thermal coal export price is $US386/t ($A544) this month, and the coking coal price is even higher. While fossil fuel hyperinflation continues to send shockwaves through the global economy and impact Australians in their skyrocketing mortgages and cost of living, this will deliver returns to Queensland taxpayers of some $147 with every tonne exported from July 2022.
The Queensland 2022/23 budget (Table 4.6 below) details coal royalties of $7.3bn in FY2022 ($1.73bn in FY2021), falling to a forecast of just $5.5bn on the conservative presumption of a rapid decline in coal prices. East Australian energy users can only pray this comes true.
But absent this normal rapid commodity price cyclicality, the windfall to Queensland could be another $10-20bn in the next year alone given close to 200Mtpa of mostly coking coal exports and a 27% royalty share of windfall prices evident at today’s near record spot prices (except for Adani’s Carmichael mine, given its 7 year royalty holiday).
Source: Queensland 2022/23 budget papers
This is reminiscent of the corporate tax rate of up to 78% applying to fossil fuel firms in Norway, a progressive tax that has given 5.5 million Norwegians a Sovereign Wealth Fund of now US$1.3 trillion, making them the richest people per capita in the world.
Sure, the Norwegian fossil fuel industry gets capital subsidies, but so too does the industry that has made Australia the third largest fossil fuel exporter in the world, right up there with the Saudi Arabian and Russian fossil fuel mafia.
Under Josh Frydenberg’s total regulatory capture, Australian fossil fuel subsidies surged to $11.6 billion in 2021-22, according to The Australia Institute.
Indonesia is the world’s largest thermal coal exporter, with NSW number two. The Indonesian government in April 2022 raised its royalty rate for coal miners from a single tariff of 13.5% to a range of 14% to 28% dependent on coal benchmark prices.
This does beg the question of why the Queensland Treasurer didn’t also address the fossil gas cartel’s gouging of eastern Australians by exporting the vast majority of our domestic gas production for a measly $1.2bn FY2022 LNG royalty on some A$23bn of east coast LNG exports.
The balance of the $70 billion Australian LNG export total delivered just $1.7 billion in FY2022 to the federal government, showing a retrospective revamp of the Petroleum Rent Resources Tax (PRRT) is also entirely overdue.
NSW’s coal export royalty flat rate of just 7-8% is a tiny fraction of the 27% Queensland will get at today’s unprecedented hyperinflated prices.
If sustained for a year, the difference in NSW coal royalties is a staggering cost to NSW taxpayers of $10-20 billion annually for a private, foreign tax haven-based gain using public assets. This is extraordinary by any measure.
What did the NSW coal industry do to be rolling in this unprecedented manna from heaven?
Beyond supercharging the “1-in-500 year” but now frequently recurring Lismore floods, and locking in regulatory approval for many of Australia’s 100 new or expanded fossil fuel projects, and leaving us with a coal power fleet unable to source coal at a remotely acceptable cost for Origin Energy’s Eraring and EnergyAustralia’s Mt Piper coal-fired power plants – nothing. Absolutely nothing.
This is war-profiteering. It should be super-taxed to offset the surging energy bills NSW taxpayers are facing across every purchase of petrol, fossil gas and our super high emissions electricity.
The NSW Minerals Council has served its foreign tax haven based billionaires supremely, including the Chinese Yancoal, tax haven based Peabody Energy and ex-National Party Leader Mark Vaile-led Whitehaven Coal.
And let’s not forget Glencore, which this week has again pleaded guilty to UK’s Serious Fraud Office for corruption and bribery, following their US$1.1bn fine and guilty plea to corruption and market manipulation in the US. Surely nothing to see here in Australia from our biggest multinational fossil fuel firm?
There has never been a more urgent need for federal government action to serve the people of Australia and end the era of regulatory capture under the lost decade of federal LNP government, authors of the infamous ‘gaslit recovery’ scam.
This week’s contrasting state budgets in our two preeminent coal export states demonstrate incontrovertibly that it is time for federal Treasurer Jim Chalmers to back a Carbon Export Windfall Tax. NSW’s loss can and should become the Australian people’s gain.
And while we are talking of windfall gains and war profiteering, after 60 years of mining industry subsidies, it is time to cap the diesel fuel rebate at say $50m per tax haven based firm per year.
Josh Frydenberg’s March budget revealed just this one mining subsidy costs Australians $7-9 billion annually, whilst undermining Australia’s energy security by delaying the shift from expensive imported high emissions diesel to domestic zero emissions electric vehicles.
Given iron ore and coal profit margins of well over 80% at current prices, our billionaires and tax haven based multinationals can afford to pay the same level of tax on their fuel that 25 millions Australians have been paying for the last six decades.
At a time of Australian fiscal crisis, the mining industry should be made to share just a skerrick or two of their hundred billion dollars of annual windfall profits. Maybe even WA should consider making their iron ore royalties progressive, not withstanding the inevitable IPA backlash!