NSW faces $1.7bn hit to coal income

The NSW government expects royalty revenue to be lower by $1.7 billion over the four year period to 2018/19 due to lower coal prices and volumes.

The NSW government expects to take a hit of around $1.7 billion over the four years to 2018/19 on account of lower-than-expected mining royalties.

Compared to its forecast a year ago, royalty revenues were down nearly $270 million in the 2015/16 financial year alone, hit by a fall in coal prices and lower growth in coal exports.

"Key factors underpinning the 2016/17 budget forecast include continuing weak US dollar coal prices, slower growth in coal export volumes and a lower Australian dollar against the US dollar over the forward estimates," the state budget released on Tuesday showed.

Benchmark prices for thermal coal - a key export for NSW, have tumbled over the last three years and currently hover around $US52 per tonne, in line with the prolonged downturn in the global commodities market.

The NSW government has now estimated prices to be around $US55 a tonne in 2016/17, down from its previous forecast of nearly $US 70/tonne in last year's budget.

The state now expects to earn royalty revenue of $1.26 billion in 2016/17, $1.34 billion in 2017/18, and $1.41 billion in 2018/19.