NSW funding to be cut if royalties rise

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If NSW goes ahead with its decision to raise mining royalties the federal government will almost certainly cut the state’s infrastructure funding, Treasurer Wayne Swan said yesterday.

Swan’s comments follow Premier Barry O’Farrell’s announcement yesterday 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.”

Albanese 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.”

Greens leader Bob Brown said the NSW royalty rise exposed weaknesses in the MRRT legislation.

He said the tax had been left vulnerable to plunder by the states, and mining companies should not be refunded for royalties.

Yesterday WA Premier Colin Barnett said he had “sympathy for NSW” due to the direct impact of the carbon tax on its power generation.

Barnett said he doubted the federal government would honour its pledge under the MRRT to reimburse mining companies.

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