Increasing royalties would hurt the federal Budget because, under the super profits mining tax deal, any increase in state tax on mining leads to the federal government taking an equal amount less in royalties.
A similar move by West Australian Premier Colin Barnett stripped $2 billion from the federal Budget.
Any increase in NSW royalties would put Treasurer Wayne Swan's $3.5 billion surplus for 2012-13 at risk.
"We reserve the right to consider all measures in the budget," State Treasurer Mike Baird said yesterday.
"Our desire is to have a constructive relationship with the federal government but, we will make no apologies for standing up for NSW.".....