Swan Risking Seats in Sydney: O'Farrell

Federal Treasurer Wayne Swan is putting the future of his government at risk by threatening to cut grants for infrastructure in NSW, Premier Barry O'Farrell says.

The state government said on Tuesday it would increase mining royalties to offset the cost of the federal government's planned carbon tax.

The move could cost the commonwealth almost $1 billion because under the planned Minerals Resource Rent Tax (MRRT), miners will be credited for the state royalties they pay.

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AAP