THE ARITHMETIC OF DEPENDENCE.

There is a particular kind of fiscal vertigo that comes with watching a revenue stream that once seemed inexhaustible begin to contract. Queensland has been living with that vertigo since 2023. The state that produced coal.queensland as an economic reality long before it existed as a civic namespace has built its hospitals, roads, and schools — its very sense of governmental possibility — on a foundation that shifts with the price of coal in global commodity markets. Understanding how that happened, and what it means now, requires more than a reading of budget papers. It requires reckoning with a structural dependency that successive governments have simultaneously benefited from and struggled to address.

Last financial year, the resources sector generated around 26 per cent of all government revenue raised in Queensland, with coal producers alone responsible for close to 20 per cent. That figure — one dollar in five flowing into state coffers attributable to a single commodity — is not a marginal contribution. It is an architectural one. It determines what the government can promise, what it can build, and how much it must borrow when the commodity cycle turns.

The cycle has now turned. Queensland collected a record $15.36 billion in coal royalties in 2022–23 following the introduction of higher tiers, with revenue declining to an estimated $5.49 billion in 2024–25 as coal prices moderated. That contraction — more than $9 billion in the space of two financial years — is the single largest driver of the state’s current fiscal difficulty, and it is unfolding at precisely the moment Queensland is accelerating its commitments to infrastructure spending, Olympic preparation, and a cost-of-living relief program that was itself partly funded by the royalty windfall of earlier years.

This is the revenue Queensland cannot yet afford to lose, and the question of how it navigates that loss — structurally, fiscally, and politically — is one of the defining policy challenges of the decade.

HOW THE TIER SYSTEM WORKS.

Coal royalties in Queensland are not a fixed impost on production. They are a price-indexed, progressive system that adjusts as global market conditions move. Understanding that mechanism is essential to understanding why the state’s revenue has swung so dramatically, and why the debate about royalty rates is often conducted with less precision than it deserves.

The Queensland coal royalty system consists of six progressive tiers that apply to different price brackets: a base rate of seven per cent applies to the first $100 per tonne of coal value; a second tier at 12.5 per cent applies to value between $100 and $150 per tonne; a third tier at 15 per cent applies to value between $150 and $175 per tonne; a fourth tier at 20 per cent applies to value between $175 and $225 per tonne; a fifth tier at 30 per cent applies to value between $225 and $300 per tonne; and a top tier of 40 per cent applies to any value above $300 per tonne.

This architecture means, critically, that the headline rate of 40 per cent is applied only to the marginal value above $300 per tonne, not to the entire sale. Contrary to claims made by several mining companies and industry groups, Queensland’s coal royalty rate is not 40 per cent. The average rate based on average Queensland coal prices in 2024 was actually much lower, at 20 per cent. The Institute for Energy Economics and Financial Analysis has noted that based on Australian average coal prices from January to September 2025, the average royalty rate in Queensland would be 10 per cent — compared to 9 per cent under the old royalty regime prior to July 2022, a difference of only one percentage point.

The tiers were substantially revised in July 2022, when the previous government added three new higher brackets to capture the extraordinary windfall prices then prevailing in global markets. Then-Treasurer Cameron Dick described the change as following a ten-year royalty freeze for coal royalties, the longest pause in royalty arrangements in modern Queensland history. The government’s position at the time was direct: the existing coal royalty tiers were primarily designed for lower coal prices, with a top tier at $150 per tonne charged at 15 per cent. With coal recently trading at over A$500 per tonne, the then-current rate structure was, in the government’s words, “clearly no longer fit for purpose.”

The change to the Queensland royalty rate implemented in July 2022 addressed the decoupling of royalties paid from coal prices, which had begun during the coal price spikes in 2021 and 2022. Prior to July 2022, the highest Queensland royalty rate applied was 15 per cent for coal sold above AU$150 per tonne — meaning the average royalties paid generally correlated closely with prices when coal sold for $200 or less. As coal prices spiked during 2021 and 2022 in response to global commodity supply shocks and geopolitical events, the amount of royalties paid did not increase at the same rate as prices. The revised tiers were, in this reading, a correction rather than an overreach.

THE BOOM, THE RECORD, AND THE CONTRACTION.

The 2022 reforms arrived at a moment of unusual confluence: a war in Europe that disrupted global coal supply chains, China’s reduced importation of Australian coal creating secondary demand pressure elsewhere, and COVID-19-related supply disruptions that had already tightened the market. On a year-average basis, the premium hard coking coal price was estimated at US$364 per tonne in 2021–22, an increase of more than 200 per cent on 2020–21. A key driver of the surge had been China’s strong demand for coal from other exporters, which had temporarily distorted global market dynamics; coal prices were also impacted by European buyers reducing their purchases of Russian coal following the commencement of the Russia-Ukraine conflict.

The fiscal consequence was historic. The royalty changes implemented in 2022 nearly doubled state revenue from $7.7 billion in 2021–22 to $14.8 billion in 2022–23, despite coal production volumes remaining relatively stable. This dramatic increase was primarily driven by high coal prices during that period. The progressive system was functioning exactly as designed: capturing a proportionally larger share of windfall profits during a price boom while, by its own logic, leaving lower imposts during ordinary or depressed price conditions.

The additional revenue raised from coal royalties, including the new tiers, allowed the government to invest more than $16 billion in critical economic and social infrastructure and essential services across all regions of the state, including in coal-producing regions. Progressive coal royalties also funded the $1,000 rebates that every Queensland household received off their electricity bill from 1 July. This is not a trivial point. The windfall years did not simply disappear into consolidated revenue; they were deployed, visibly and deliberately, in programs that Queenslanders could touch.

But the boom was always going to end. Queensland’s state government expected to collect A$5.5 billion in coal royalties over the 2024–25 financial year, down from A$10.5 billion in the previous year — a near-halving that the state government acknowledged was partly driving a budget deficit. State royalty revenues were expected to remain depressed until at least the 2028–29 financial year because of continued coal price weakness, with the government forecasting collections of approximately A$5.8 to 6.2 billion per year over the next four financial years.

The $5 billion reduction in coal royalties resulted in the decrease in all royalties by $4.8 billion — a shock that drove Queensland’s operating result sharply into deficit and that the Queensland Audit Office identified as a key driver of the state’s deteriorating fiscal position through its 2025 Managing Queensland’s Finances report.

THE COMPOUND PROBLEM: GST AND HORIZONTAL FISCAL EQUALISATION.

The royalty contraction would be manageable were it the only pressure on Queensland’s budget. It is not. There is a second mechanism — structural, federal, and deeply contested — through which Queensland’s coal royalty capacity is turned against it: the Commonwealth Grants Commission’s system of horizontal fiscal equalisation, which governs how GST revenue is distributed among the states.

The principle behind horizontal fiscal equalisation is a foundational one in Australian federalism: that each state should have the fiscal capacity to provide comparable standards of services to its residents. The Commission assesses each state’s ability to raise its own revenue, and those with higher assessed capacity receive proportionally less GST. Coal royalties are central to that assessment for Queensland.

Higher coal prices and royalty rates, combined with Queensland’s large share of coal production, significantly increased its assessed capacity to raise revenue from coal royalties — decreasing its GST needs. Queensland was set to receive around $16.6 billion in GST in 2025–26, $1.2 billion less than in 2024–25. The Commonwealth Grants Commission confirmed that the fall was primarily due to significant growth in Queensland’s capacity to earn coal royalties, both from higher coal prices and from an increase in the average national coal royalty rate.

The compound effect — royalty revenues falling while GST allocations are also being reduced — is severe. Coal royalties declined by $5 billion in 2024–25 and Queensland’s GST revenue allocation simultaneously decreased by $2.3 billion, with the combined impact threatening the state’s fiscal rating. As the 2025–26 Queensland Budget papers observed, in 2025–26, royalties remained considerably below previous highs, and the impact on overall revenue growth was compounded by the Commonwealth Grants Commission’s 2025 methodology changes, which resulted in GST revenue declining materially and by more than previously expected.

There is a further irony embedded in this architecture. When Queensland chose to raise its royalty rates in 2022 to capture more value from its own natural resources, the proceeds were partially redistributed to other states through the GST equalisation mechanism. As then-Queensland Resources Council chief executive Ian Macfarlane noted at the time of the 2022 changes, “because of the GST equalisation process, 80 per cent of the extra royalties raised will be redirected to Canberra over the next five years anyway.” Queensland was simultaneously the author of its own windfall and, through federal fiscal architecture, its own diminished GST entitlement. The Queensland Government contests both the magnitude of this effect and the methodological decisions underlying it, continuing to advocate strongly for a fair share of GST revenue and actively engaging in the 2026 Australian Productivity Commission inquiry on horizontal fiscal equalisation.

THE LEGISLATIVE LOCK: PROTECTING THE FLOOR.

Aware that any future government might be tempted — by industry pressure or fiscal circumstance — to roll back the 2022 tier increases, the then-Miles Government moved in 2024 to entrench the royalty structure in primary legislation. The Progressive Coal Royalty Protection (Keep it in the Bank) Bill 2024 introduced a coal royalty rate floor stating that “a regulation cannot prescribe coal royalty rates which are lower than those prescribed from time to time,” meaning progressive coal royalties could not be removed or amended without prior positive endorsement from the Queensland Parliament.

The legislation established formal requirements for parliamentary approval before any modifications to the royalty rates could be implemented, creating a more transparent process for future adjustments. The bill amended the Mineral Resources Act 1989 and was defended by the government as protecting the public’s interest in a resource that belongs to Queenslanders, not to the companies licensed to extract it.

The progressive coal royalty rates, introduced as part of the 2022 Budget, were designed to make sure Queenslanders are compensated fairly for the sale of the state’s valuable and limited natural resources when coal prices are high. That framing — royalties as compensation for a publicly owned resource rather than as a tax on enterprise — is philosophically important. It positions the royalty not as an imposition on industry but as the price of access to something that belongs to the collective, a price that should reflect the market value of what is being extracted.

The incoming Crisafulli Government, which took office following the October 2024 state election, has maintained the royalty structure despite sustained industry pressure for relief. During the 2024 election campaign, Premier Crisafulli committed to keeping the system in place, and has subsequently reinforced this position when questioned about potential changes, advising the industry not to “hold out hope” for adjustments beyond 2028.

INDUSTRY PRESSURE AND THE EMPLOYMENT QUESTION.

The royalty debate is not conducted in a vacuum of fiscal theory. It is accompanied by real consequences in regional Queensland — consequences measured in jobs, community viability, and the future of towns built around a single industry.

The financial impact on coal producers has been substantial, with BHP announcing 750 job cuts across its Queensland operations in September 2025. According to the Queensland Resources Council, these cuts were directly attributed to the coal royalty regime, with the company also placing a mine into care and maintenance status. Anglo American also confirmed job losses across its Brisbane offices and Bowen Basin operations, reportedly affecting more than 200 positions.

Industry bodies have framed the issue in terms of competitive disadvantage. MineLife senior resource analyst Gavin Wendt emphasised this competitive concern, noting that coal mines in New South Wales were not experiencing the same issues because the royalty system there is completely different, and that while Queensland coal producers might be “losing money” per tonne, “that same tonne of coal in NSW you can be making money.” New South Wales operates a flat-rate system — under the Mining Regulation 2016, the applicable rate varies by extraction method, ranging from 6.2 per cent for deep underground mining to 8.2 per cent for open cut operations — making direct comparison with Queensland’s price-indexed progressive tiers genuinely complex.

Independent analysts have offered a more nuanced reading. A comparison of unit costs for metallurgical coal producers operating in Queensland found that while prices had returned to historical levels, unit costs remained elevated — with company reports from 2018 to 2025 showing unit costs rising by up to 50 per cent for metallurgical coaliners. There are many contributing factors, including Queensland’s higher royalty rates, but these have risen by a lesser amount than other costs. The Institute for Energy Economics and Financial Analysis has been direct in its assessment: there is not sufficient data or evidence to support the claim that Queensland royalty rates are causing a decrease in income and investment across the industry, but there are indicators showing the rise of other risk factors for the industry that far outweigh royalty costs.

The reality, as is often the case when royalty rates and commodity cycles intersect, is that both things can be partially true. The royalty regime does impose real costs that compound the pressure of lower prices and higher operating expenses. It also does not operate at a 40 per cent flat rate, and the contraction in production and investment has multiple causes, of which royalties are one among several.

This revenue stream has become crucial to Queensland’s fiscal position, accounting for a significant portion of state income during peak collection years — and as Central Queensland University professor John Rolfe has observed, this creates a structural bind: “It makes it hard for the government to adjust the numbers because the fiscal situation is tight, and if they do try and reduce royalties back to a more sensible position, it then puts other parts of the budget into trouble.”

THE BUDGET UNDER PRESSURE: WHAT THE NUMBERS SHOW.

The 2025–26 Queensland Budget, delivered by Treasurer David Janetzki on 24 June 2025, laid out the fiscal consequences with unusual candour. The 2025–26 deficit will hit a substantial $8.6 billion, comparable to levels seen during the height of the COVID-19 pandemic. Coal royalties flatlining and GST losses were directly cited as responsible for low state revenue projections and the need to address what the Treasurer described as four “big crises” — health, crime, cost of living, and housing affordability.

At the same time, the government is committing to an extraordinary infrastructure program. The capital program focuses on key Queensland investment priorities including delivery of the Hospital Rescue Plan, the 2032 Delivery Plan, the Residential Activation Fund, and a pipeline of social and community housing, with the capital program expected to total $116.8 billion over the four years to 2028–29. This is a paradox of a particular kind: a government constrained by the very revenue source that once enabled its predecessor’s ambitions, yet simultaneously expanding its infrastructure commitments in anticipation of a revenue recovery that may arrive — or may not — on schedule.

It is a calculated bet at a time when the cost of delivering services and essential infrastructure to a growing population is increasing, while revenue from GST redistributions and coal royalties is decreasing. The Queensland Audit Office, in its 2025 review of state finances, noted that operating deficits are forecast to continue as revenue growth remains flat and the government prioritises cost-of-living support and investments in health, housing, and community safety.

Key revenues — taxes, royalties, and GST — are fundamental to the state’s finances, as they make up the majority of Queensland’s untied general revenue. Other revenue sources, such as non-GST grants from the Australian Government and revenues from sales of goods and services, are largely tied to corresponding expenses. In this architecture, the coal royalty is not simply one revenue line among many. It is part of the small cluster of revenues that governments actually control their discretionary spending with. When it contracts, the consequences permeate the entire budget.

The Queensland Government spent $20.3 billion on new infrastructure assets in 2024–25, including $7.1 billion on Queensland’s transport network and $5.1 billion on energy projects. The appetite for capital investment — driven by population growth, the Brisbane 2032 Games pipeline, and the energy transition — is not moderating. Queensland Treasury Corporation has announced its largest borrowing program to date at $32.5 billion during 2025–26, with new borrowings and refinancing expected to peak at $35.4 billion in 2026–27.

The arithmetic is unsparing. Borrowing fills the gap that royalties no longer fill, but borrowing carries its own costs. The general government sector used 2.92 per cent of its operating revenue to service the cost of debt in 2024–25 — a figure expected to increase to 6.57 per cent by 2028–29. Debt service competes with health, education, and housing for the same revenue. If coal prices remain at suppressed levels for longer than the forward estimates assume, that competition becomes acute.

A STRUCTURAL DEPENDENCY WITHOUT AN EASY EXIT.

Queensland is not unique in finding itself dependent on a commodity revenue that is subject to forces entirely beyond its control. Western Australia has confronted analogous questions about iron ore; Norway spent decades constructing an institutional buffer — the Government Pension Fund Global — precisely to insulate public finances from the oscillations of petroleum royalties. Queensland has had no equivalent sovereign wealth architecture, and the period of peak royalty collection from 2022 to 2023 was deployed in immediate service delivery and cost-of-living relief rather than in endowment building.

This is not a criticism so much as a description of the political economy of federation. A state government facing intense pressure on health, housing, and infrastructure, and operating under the constraints of horizontal fiscal equalisation, faces powerful incentives to deploy windfall revenue immediately rather than to quarantine it. The royalties belonged to all Queenslanders; the immediate pressures on all Queenslanders were real and visible.

What is clear, as the Queensland Budget papers and the Queensland Audit Office’s 2025 analysis confirm, is that the structural dependency on coal royalties is not resolving itself — it is merely shifting from a dependency on high prices to a dependency on sustained volumes at moderate prices. State royalty revenues are expected to remain depressed until at least the 2028–29 financial year because of continued coal price weakness. And the energy transition — accelerating in the markets that consume Queensland’s thermal coal, and emerging as a question even for the metallurgical coal sector — introduces a longer-horizon uncertainty that no budget cycle can adequately price.

While metallurgical coal remains critical for steelmaking, major importers like Japan and South Korea are investing in hydrogen-based steel production, and China is accelerating alternative processes that reduce dependence on imported coal. For a region built on metallurgical coal exports, these shifts magnify the impact of every extra dollar in royalties. The royalty debate, in this context, is not merely a technical question about tax policy. It is a question about the temporal horizon of a revenue dependency — how long it persists, how it declines, and what replaces it in the fiscal architecture of the state.

CIVIC RECORD AND PERMANENT ACCOUNT.

The financial architecture that coal royalties have built — the hospitals funded, the schools constructed, the rebates delivered, the deficits now partially compounded by their contraction — constitutes a civic record of unusual specificity. It is a record that connects extraction decisions made in the Bowen Basin to classroom renovations in Cairns, to emergency departments staffed in Townsville, to household budgets relieved of a thousand dollars across three million Queensland homes. That chain of consequence deserves to be documented with the same permanence that the coal itself once seemed to promise.

The onchain namespace coal.queensland exists as part of a broader project to anchor Queensland’s civic and industrial identity to a permanent, verifiable layer of record — one that neither commodity cycles nor budget cycles can erase. The fiscal history of coal royalties is not a story that ends with any single budget paper or any single price cycle. It is a continuous account of how a state has priced its inheritance, deployed the proceeds, and now navigates the reckoning of a dependency that served it well in the boom and constrains it in the correction.

Queensland’s coal royalty system — its tiers, its legislative protections, its role in funding essential services, and its complex entanglement with federal GST redistribution — is among the most consequential and least publicly understood features of the state’s fiscal life. The revenue Queensland cannot yet afford to lose is also the revenue it cannot afford to take for granted. The question ahead is not whether the dependency will ultimately diminish — it will — but whether the state uses the intervening years to build the fiscal resilience that the boom years, for understandable reasons, did not produce.