Federal treasurer Wayne Swan has once more threatened states over mining royalties rises.
Late last year Swan threatened the states with cuts to infrastructure funding if they chose to raise mining royalty rates.
According to NSW treasurer Mike Baird, Swan wrote to him stating that another royalty rise, like that carried out in September last year, may compel the Government to enforce financial sanctions on the state – such as holding back infrastructure funding.
Western Australia was also in the targets of the Federal Government.
In March last year Swan made the same threats, saying up to $2 billion in funding for infrastructure upgrades may be cut.
Two months later a raise in the iron ore fines royalty rates by WA premier Colin Barnett saw the state and Federal Government again clash.
Now Swan is warning states again, as royalty rises have already begun to bite the mining tax's revenue returns.
According to a letter the Herald obtained, Swan says that any state or territory that increase rates will be docked federal funding – either GST revenues or infrastructure money.
Swan will now seeking assurances from the nation's premiers that they follow the federal line at a meeting later this year.
'The review panel has identified ways the Commonwealth could, by itself, act to address the continuing tension, including by imposing further penalties on those states that increase royalties on coal and iron ore, or by revisiting the treatment of royalties under the minerals resources rent tax,'' Swan's letter states.
''In the event that we are not able to reach an agreement on the interaction between state minerals royalties and the MRRT, the Commonwealth will implement measures to protect MRRT revenue from recently announced or future royalty increases.''
It is believed that the mining tax will fall short of its$13.4 billion target.
Swan's threats come as the NSW Government is accused of breaking its promise to mining regions to provide adequate funding from mining royalties.