Lower coal prices lead to NSW revenue shortfall

NEW South Wales revenue has been hit by the coal price weakness, with a 10% downward revision of royalties worth $A153 million, according to the state budget.
Lower coal prices lead to NSW revenue shortfall Lower coal prices lead to NSW revenue shortfall Lower coal prices lead to NSW revenue shortfall Lower coal prices lead to NSW revenue shortfall Lower coal prices lead to NSW revenue shortfall


Kristie Batten

Mining investment in NSW has fallen 45% in the past four years, leading to more than 2000 jobs being lost in mining in the past 18 months, according to the NSW Minerals Council CEO Stephen Galilee.

“As with previous years, the budget notes the important contribution mining makes to the NSW economy, confirming that over 2013-14, mining delivered $1.36 billion in royalties, helping to fund services we all use like schools, hospitals, emergency services and public transport,” Galilee said.

The NSW government continues to underestimate the impact that the combination of uncertainty surrounding the NSW planning system, a high Australian dollar and a fall in commodity prices is having on future royalty revenue, he said.

“Last year’s budget forecast an increase in mining royalties of around 14%,” Galilee said.

“This year’s budget papers reveal that in reality, royalties over the last year were 10% lower than forecast. This year the budget forecasts an increase in mining royalties of around 17% in 2014-5.

“This increase will not be realised without the right policy settings from the NSW government, starting with changes to the planning system that provide the certainty needed to attract further investment.”

The budget papers also indicate the relative strength of the NSW economy is being propped up by household and government spending. NSW has experienced a decline in business investment in the mining and non-mining sectors over 2013-14, according to Galilee.

“This is a worrying warning sign for the NSW economy. If NSW is to truly become the first state in Australia to do business, more must be done to attract greater business investment, including in mining,” he said.

The Association of Mining and Exploration Companies (AMEC) CEO Simon Bennison said while the government should be commended for handing down a solid budget forecast, it had overlooked mining.

“The New South Wales Budget has ignored many of the concerns raised by the mineral exploration and mining industry,” he said.

AMEC applauded the continuation of funding for the Geological Survey of NSW, but said it was concerning that there was no funds committed for a co-funded drilling program.

“Whilst the NSW Government has repeatedly said they are open to the industry, and AMEC has seen a renewed sense of urgency from the Division of Resources & Energy under Anthony Roberts, much more needs to be done to demonstrate this," Bennison said.

“AMEC calls on the New South Wales government to remove regulatory costs and threats of greater environmental sanctions.

"It is essential to incentivise greenfield exploration and provide regional infrastructure to unlock the state, to grow the mineral mining and exploration industry to support long-term Government revenue streams."


The budget also contains some welcome additional funding for mining region infrastructure.

“Today’s allocation of an additional $100 million the Hunter Infrastructure Investment Fund (HIIF) is welcome. However, unlike the pattern of previous HIIF funding allocations, it is important that the Upper Hunter receive its fair share of funding,” Galilee said.

“Investing an additional $87 million in the important Resources for Regions Program will also provide a boost to infrastructure in mining communities in the New England North West, Central West, Hunter and Illawarra.

“This is a good start, but more is needed. Mining communities will be looking for increased and ongoing funding for the Resources for Regions program before the next state election. The eligibility for Resources for Regions funding should also be increased to enable more mining communities to participate.”

Two years ago in the 2012-13 Budget, mining was “ambushed” with nearly $80 million in new fees and levies, Galilee said.

“Mining workers across the state will be relieved that this year the NSW Government has resisted the temptation to impose further new taxes and levies on the sector,” he said.

“Mining is currently doing tough, we have seen thousands of jobs lost, and any new costs would have been likely to mean even further job losses.”