The NSW Minerals Council has attacked the government over its threats to withhold infrastructure funding for the state’s mining regions.
Minerals Council CEO Stephen Galilee voiced his concerns over the Federal Government’s review of GST distribution regarding state royalties "particularly given the potential for the Commonwealth to manipulate the GST to force the hand of states".
This is not the first time the issue has raised its head.
In September last year Federal treasurer Wayne Swan stated that the government would cut funding if mining royalties were raised in NSW.
Swan’s comments follow Premier Barry O’Farrell’s announcements that NSW would raise mining royalties to pay for the increased costs of the carbon tax.
Under the minerals resources rent tax the Commonwealth is liable to refund all state royalties back to resource companies, which means Canberra will foot the bill for any state royalty hike.
"If Mr O’Farrell wants to take this action then that will simply mean less money for infrastructure in places like NSW," Swan said.
Infrastructure minister Anthony Albanese also weighed into the debate by backing Swan’s call.
Albanese warned O’Farrell that for "every decision, there’s a counter-decision".
He said O’Farrell’s decision was not in the best interests of the country, and the federal government would protect itself from any royalty hike.
"The idea that a state government can take money off the federal government is an interesting way in which to proceed," he said.
"Certainly it is counter-productive and the Government will protect our revenue base."
According to NSW treasurer Mike Baird, Swan wrote to him stating that another royalty rise, like that carried out in September, may compel the Government to enforce financial sanctions on the state – such as holding back infrastructure funding.
Baird and O’Farrell argue the rise is necessary to offset the cost of the carbon tax, which they estimate will cost the state $950 million over the next four years.
Galilee stated that the issue has grown in importance following the passing of the Mineral Resources Rent Tax last night.
"The NSW minerals industry strongly supports the mining towns and communities across the State in calling for a fair share of infrastructure funding from the Commonwealth," Galilee said today.
"The Commonwealth‘s threat to withhold infrastructure funding available to NSW under the $6 billion Regional Infrastructure Fund inflicts the hardest blow to the individuals, families and communities in key mining regions across NSW.
"And the Commonwealth‘s additional threat to potentially withhold GST distributions to NSW in retaliation for the NSW Government‘s changes to mining royalties should also be withdrawn.
"The NSW Minerals Council does not support increased state mining royalties. However, our mining communities should not be penalised for the Federal Government‘s failure to strike an agreement with the NSW Government on the level of mining royalties."
He added that the state is ‘already on the back foot’.
NSW is not the only state which has been threatened with finding cuts.
West Australian premier Colin Barnett has already gone head to head with Swan on the issue of raising royalties.
"The Federal Government has repeatedly said the purpose of their mining tax is to share the benefits of the boom. If so, then why deny the mining communities of NSW their fair share?" Galilee asked.