THE Queensland Premier, Campbell Newman, has called Wayne Swan's bluff and increased mining royalties by $1.6 billion, a move that has angered the coal sector and blunted the federal Coalition's attacks on Labor's mining tax.
In its debut state budget yesterday, Mr Newman's Liberal National Party government slashed 14,000 public service jobs and increased mining royalties on coal by $1.6 billion over four years. Combined with the $1.5 billion royalty increase by NSW in its last budget, the Queensland decision takes to $3.1 billion the amount the two states could gouge from the mining tax proceeds, estimated to be $13.4 billion over four years.
This puts pressure on Mr Swan to make good on his promise to dock the states the commensurate amount of federal funding.
Queensland's budget coincided with the NSW government's decision yesterday to axe 1800 jobs from the education sector to save $1.7 billion.
The federal government seized on the actions of both state governments yesterday, neither of which were mandated, to claim the federal Opposition Leader, Tony Abbott, who had been informed in advance of the cuts, would do the same if elected.
''What we are seeing here is a clear warning. We are getting a sneak preview of what an Abbott government would do to health and education nationally,'' Mr Swan, who is the acting Prime Minister as well as the Treasurer this week, said. ''Today we have had news from NSW of some of the biggest cuts in education in 20 years, all supported by the Leader of the Opposition.
''We know he was consulted by the NSW government about these cuts. Huge education cuts in NSW and the loss of 15,000 jobs in Queensland - this is what Liberals do. They take the axe to health and education.''
Mr Newman's royalty increase, however, may be of no net benefit to his budget bottom line if Mr Swan penalises Queensland for the move.
Under the terms of its Minerals Resource Rent Tax, the government agreed to refund coal and iron ore miners for all present and future royalty increases.
But this loophole has enabled the states to keep increasing royalties and gouge the profits of the mining tax, which have already been budgeted for small business tax cuts, superannuation increases and infrastructure projects.
With the mining tax revenue and the budget surplus target already under threat, Mr Swan wrote to all the states three weeks ago saying those that proceeded with royalty increases after July 1, 2011, would be docked the same amount of federal funding, be it GST revenue or infrastructure money.
The Leader of the Greens, Christine Milne, repeated her call for the loophole to be closed by legislation.
''Until this loophole is closed, Campbell Newman, Colin Barnett and co can lift state mining royalties as high as they like in the full knowledge that it is the Commonwealth government who will foot the bill,'' she said.
The coal sector said Queensland now had the highest coal taxes in the nation and the equal highest in the world.