FEDERAL Treasury secretary Ken Henry has said the Gillard government could threaten resource-rich states with financial penalties to deter higher mining royalties.
He told a parliamentary inquiry yesterday the commonwealth could use its financial clout over the states to defuse the standoff between miners and the government over who will foot the bill for any future rises in royalties, The Australian Financial Review reports.
"Principally the commonwealth's power comes through the states' reliance on the commonwealth for funding for such a large proportion of their funding," Dr Henry told the inquiry into the $7 billion mineral resource rent tax (MRRT). "The appropriations power affords the commonwealth Parliament a fair degree of leverage."
The government wrapped up its consultations on the tax last week, but tensions erupted again yesterday when billionaire miner Andrew Forrest accused Resources Minister Martin Ferguson of making misleading comments about the impact of the MRRT after Fortescue Metals Group announced an $US8.4 billion expansion in the Pilbara.
"We know first-hand that it [the mining tax] is the single biggest issue confronting financiers interested in investing in Australian iron ore mining projects," Mr Forrest said in a statement. "It remains the case that the MRRT will act as a serious deterrent to new companies, and Fortescue's ability to raise funds is not evidence to the contrary."
