Billions to bolster NSW budget with coal tax hike

Coal royalties will be hiked in NSW for the first time in almost 15 years, delivering a billion-dollar boost for the state's ailing budget.

Treasurer Daniel Mookhey on Wednesday revealed royalties on the fossil fuel would be increased by 2.6 percentage points from July next year, delivering taxpayers an expected windfall amid high global coal prices.

The change is forecast to leave the state budget more than $2.7 billion better off across the four years starting from 2024/25.

But Mr Mookhey said households could expect to see a negligible increase in their electricity bills - worth an average of less than $6 per year - from higher coal costs despite Labor not renewing a cap on prices for the commodity.

The royalty increase will coincide with the expiration of an emergency domestic coal cap put in place by the former coalition government in December last year.

That measure to limit the wholesale price of coal was rolled out in an attempt to bring spiralling power costs under control as the war in Ukraine sent shockwaves through the global energy market.

The higher coal royalty rate in the state will be 10.8 per cent for open-cut mines, with discounts applied for underground operations.

The government said the change was developed after consultation with the mining industry and key trading partners.

Mr Mookhey said the feedback from coal producers was that it was a "manageable change", defending suggestions Labor was going too soft on the industry.

He said the shift was a fair outcome for the state and replaced an out-of-date royalty regime last updated in 2009.

"The new scheme will make sure the people of NSW share in the wealth their resources create," Mr Mookhey said.

The money would be spent on essential services and providing cost-of-living relief to families, the government said.

NSW Minerals Council chief executive Stephen Galilee said the industry had consistently asked for the existing royalty regime to be maintained.

"The increase in coal royalty rates announced today by the NSW government will impose a significant additional impost on coal producers at a challenging time of lower coal prices and increased operating costs," he said.

Opposition Leader Mark Speakman accused Labor of breaking an election promise of no new taxes in order to pay for its planned pay increases for teachers, nurses and other public-sector workers.

"The Labor government's coal tax grab is needed to plug the budget black hole created by another Labor broken promise, namely no unfunded public sector wage increases," he said.

The Minns government has been priming taxpayers for a brutal budget with a forecast deficit of $12 billion for 2022/23, in contrast to the bumper surpluses in resource-rich states.

Queensland recorded a $12.3 billion surplus for the last financial year after the state's Labor government introduced new, progressive coal royalty rates.

In contrast to NSW's fixed-rate royalty system, Queensland operates tiered rates of up to 40 per cent that vary depending on coal prices.

Greens energy spokeswoman Abigail Boyd said the NSW increase was an "insult" and the Labor government had left too much potential income on the table.

“The Greens have been calling for an increased and progressive coal royalty structure that would bring in increased revenue similar to that enjoyed by Queensland," she said.

Climate Energy Finance founder Tim Buckley said the northern state ran the preferred model, which delivered major windfalls at times of high prices while easing pressure on producers when prices were low.

“(We have) long been calling for a progressive NSW coal royalty scheme to generate revenues for alleviation of cost-of-living pressures and energy poverty in the state, following the leadership of Queensland," he said.

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