The New South Wales government is looking for cash to repair their budget after the pandemic payouts, in order to save the economy, savaged the State’s economic bottom line. Coal companies will be slugged with higher royalty payments. Not surprisingly, the miners are up in arms.

The new NSW government under Premier Chris Minns has hiked these royalty payments for digging up coal that effectively belongs to the State, but is given to the miners, who pay to dig the coal up. The hike in royalty payments is 2.6% and follows the Queensland government’s bigger hit on its coal miners.

This is how the AFR reported it on June 14 this year: “The $10 billion increase in coal royalties allowed the government to deliver a record $12 billion surplus this financial year – the largest of any state in history.”

But that wasn’t all, and the following from the AFR’s Mark Ludlow shows why Premier Chris Minns is playing follow the Queensland leader: “Queensland Treasurer Cameron Dick will use a $15.3 billion coal royalty bonanza to cut household power bills and inject $19 billion into state-owned clean energy projects, a spending spree economists warned could be inflationary.”

The NSW government’s dash for coal cash is expected to bring in $2.7 billion over four years from 2024-25, the Daily Telegraph’s Colin Packham reports today. Treasurer Daniel Mookhey said the current royalties were “out of date” and the extra money collected will be used for cost-of-living relief for struggling households.

From next year, coal companies will pay 10.8% on the value of coal coming from an open-cut mine, and slightly less for coal coming from underground. This rise in royalties comes as the coal price is expected to rise with rising oil prices. Energy material prices tend to head in the same direction. The current outlook for oil prices is up, which could worry the Reserve Bank which is trying to get inflation down to the 2-3% band.

Not surprisingly, Paul Flynn, the CEO of Whitehaven, isn’t happy about the royalty hike but is happy it wasn’t as hefty as the Queensland increases.

In case you missed it, coal mining companies have had a nice run since the pandemic year of 2020 and it isn’t surprising that state governments are looking at the healthy profits of the miners. This share price chart of Whitehaven shows how the company’s share price has risen from 85 cents in 2020 to a current price of $6.37, which is a 650% gain!

Whitehaven Coal

The mining sector says this new take from the profits of coal miners comes when operating costs linked to wages, the cost of fuel, power and even machinery have all imposed an inflation hit on the profits of these businesses. This is all true but given the current share price is at a 12-year high, I don’t think there’ll be many non-miners who give a fig about the royalty hikes.

Over the next few years, federal and state treasurers will be prowling for every opportunity to collect money from potential Australian taxpayers e.g., those with big super balances, property investors, capital gainers and others, who are seemingly doing well. These people should be wary about what might lay ahead for their hip pockets.

And if you’re not a Labor voter, in a country where all governments have post-pandemic budget woes, and have Labor leaders (except in Tasmania), your bottom lines could be under fiscal attack!