Super high coal prices will boost royalties and slow the increase in Qld state debt

Back in early August I observed that higher coal prices were helping the Qld economy and state budget in this time of rolling lockdowns. Amazingly, the all important metallurgical or coking coal price has surged even higher since then. There was speculation in the Financial Review on Monday that this could mean an additional six billion dollars for the Queensland Budget, depending on how long the higher prices last (see Coal price boom softens blow from iron ore slump).

Futures prices suggest prices will remain over 200 USD/tonne for another twelve months, which is great news (see the 12th position series in the chart below which currently relates to contracts settling in August 2022, while 1st position relates to contracts settling in the current month). Of course, these prices can move around a lot, depending on global economic conditions, so things could change, particularly if there is a financial crisis in China and contagion across the region due to the Evergrande failure. Note the most recent prices in the chart below were for Monday, but I haven’t seen any news since then that would suggest they have crashed between then and now.

We really need a strong mining sector at the moment to counteract the adverse impacts of COVID-related restrictions on Queensland’s tourism sector. The Gold Coast-Northern NSW border bubble has burst again, and tourism businesses are now worried interstate borders could remain closed over Christmas.

Finally, it is distressing that Australia is seeing its greatest internal turmoil since probably the dismissal of the Whitlam Government and the subsequent federal election period in 1975. In Victoria, we have just learned how far a government can restrict the liberties of its population before its people push back en masse. People were willing to go along with the restrictions so long as those restrictions appeared to be proportionate to the risk and fair, but in Victoria and arguably in other states, too, those restrictions have been disproportionate and unfair, even cruel.

The hard border policy enacted by the Queensland Government has caused immense suffering, and it is the policy that’s the problem, even though the Premier has tried to blame Queensland Health bureaucrats for actually enforcing the Government’s policy. There is a constraint on how many people we let into Queensland, i.e. available hotel quarantine rooms, and, if the bureaucrats show mercy on one individual, they will need to make another suffer.

In my view, the federal government needs to show some leadership to bring all our rogue state premiers into line before they do even further damage to the economy and people’s lives and wellbeing.

Please feel free to comment below. Alternatively, you can email comments, questions, suggestions, or hot tips to contact@queenslandeconomywatch.com. Also please check out my Economics Explored podcast, which has a new episode each week.

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2 Responses to Super high coal prices will boost royalties and slow the increase in Qld state debt

  1. Paul says:

    Be interesting to see if those coking coal prices are spot prices or annual contract prices. From recollection most used to be annual contract prices negotiated earlier in the CY. This will affect the total revenue and Qld royalties in the annual 2021-22 Qld Budget.

    Quarantine constitutionally is a federal responsibility. The Federal Government has demonstrably failed, again and again in keeping Covid 19 out of Australia. That’s why we have the virus in Australia and repeated outbreaks, all originally from overseas travellers. Specialised fit-for-purpose quarantine stations are essential to accommodate international travellers before they are allowed in the community, particularly for the highly infectious Delta variant and possible future variants. Both Queensland and Victoria are now building such facilities – to do what the Federal Government should have done over a year ago.

    In the face of such Federal incompetence, the States are fighting rear-guard actions against the virus using lockdowns etc to protect people’s lives. Far from being rogue, the states are the ones which are carrying the load and defending the nation – and Queensland is among the most successful of them (so far).

    To avoid our fellow citizens (or ourselves) dying of the virus then the relevant medical rules to prevent the spread of the virus must be followed. This may be inconvenient or reduce some people’s income or cause some businesses to fail. A financial burden which falls unfairly, but death from the virus is unfair also.

    Demonstrations, such as we’ve seen in Melbourne, against masks, vaccinations and lockdowns are a disgrace. They are not about liberty and freedom, more of a throwback to medieval ignorance. Such mass gatherings without masks or social distancing simply increase the chances of the spread of the virus and the need for further lockdowns.

  2. Glen says:

    Unfortunately the states have failed Australia, every single one of them, from the time Tasmania decided to close its border and others followed the country had fractured and been that way since, it has been terrible to watch our country fall to bits the way it has. I really fear for our country if we were ever to go to war again, our national spirit has dissolved and I don’t think will ever return and as a Queenslnader I am ashamed of our state and the disgusting way we have treated our own citizens.

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