Increases in royalties charged by conservative state governments will cost many mining companies more in the short term than the minerals resource rent tax.

The industry's peak body said that the prediction raises serious questions both for the federal government's budget estimates and the opposition's argument that Labor's new taxes are to blame for mining's waning international competitiveness.

Mr Ian Macfarlane the Coalition's spokesman on resources said that a new analysis for the Minerals Council of Australia by Port Jackson Partners which found that rising costs and falling productivity meant that miners were becoming relatively less competitive, showed the government was treating the industry like a 'cash cow.

However, Mr Mitch Hooke the council's CEO said that in today's market conditions the USD 3.3 billion in royalty rises announced this year by the Queensland, NSW and West Australian governments would over the next 4 years, cost miners more than the mining tax, which is supposed to raise USD 13.4 billion in the same period.

State governments had thought that their royalty increases would effectively be paid not by mining companies but by the federal government which had promised to reimburse miners for the royalty rises that were announced after the mining tax came into effect. With commodity prices falling, many miners think they will not have to pay a federal profits based tax, meaning the government will not have to reimburse anything because there is no liability to be rebated against.

Mr Hooke said hat ''In the current market circumstances, the royalty increases are going to be a far bigger impost. You don't have to be a rocket scientist to figure out that as prices come off the mining tax is going to be very slim pickings which means there will be no opportunity to rebate the royalty increases.''

Source - Canberratimes.com

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