Drop in resource prices hits hard

I HAVE always been a supporter of the fundamental principles behind the Minerals Resource Rent Tax.

If a mining company is making huge profits from our coal fields then it should direct a portion of that extra wealth to assist communities that are suffering from the impact of the resource boom.

It makes sense for the rich to pay more tax - and wealthy miners have been benefiting from extraordinary market conditions as they mine the resources owned by the people.

But if the sector is struggling due to a drop in prices or extreme weather conditions, then the MMRT won't be triggered.

Remember, this is a super profits tax and $6billion of it is flagged to be shared across mining centres such as Rockhampton over the next nine years as part of the Regional Infrastructure Fund.

However, the Queensland Government has made it clear it intends to fight the MMRT.

Queensland Attorney-General Jarrod Bleijie said the government could not sit back and do nothing in the face of a threat to its resources industry and jobs.

But while the state pleads its desire to protect the mining sector, it has also decided to look at increasing state mining royalties.

Treasurer Tim Nicholls this week reportedly said no decision had been made, but all sectors of the community were being asked to make a contribution to "the task that Queensland needs to undertake to get the state finances back in order", and increased taxes or charges could be part of that. It seems mining royalties, gaming taxes and "a number of other smaller charges and fees" are among the few avenues left open for the government to generate extra revenue.

So while the state eyes off extra royalties, Member for Flynn Ken O'Dowd warned Federal Parliament the coal boom might be about to burst.

"Commodity prices have been falling for some months now, and they could fall even further. The break-even price for our thermal coal is $80 per tonne - and that is what it is now," he said this week.

"There are some predictions that this could even drop to $50 a tonne. Let us hope that this is not correct. Coking coal, at $180 a tonne, is a little bit stronger, but it is also down from $230 a tonne. The MRRT, the carbon tax, high fuel prices and the high Australian dollar are not helping our fiscal budgets, and any windfall this government thinks it is going to make out of the mining tax is going to be sadly missed."

This is sobering stuff. But the real path forward will be revealed by the annual profits of the big miners.

By Frazer Pearce, editor.