The mining industry is hugely responsible for economic prosperity in Australia, but a new report says there is a big cost when states choose to dig.

New analysis says some states put more than half of their royalties from mining directly back into the industry in the form of subsidies, support and hand-outs.

Investigators from the Australia Institute pored over the past six budgets from each Australian state and territory to find about $17.6 billion worth of assistance for the mining sector.

They found that the biggest mining states also give the biggest subsidies, but the claims were quickly slammed by mining industry advocates. 

The report says Queensland and Western Australia top the list, handing out $9.5 and $6 billion to their respective resource operators.

In this financial year alone, about 60 per cent of Queensland's mining royalties have been given straight back to the industry.

According to members of the think tank, the Queensland Government spends nearly as much money supporting its mining industry as does on new hospitals.

Similarly, the Institute says the Western Australian Government has spent about as much money on subsidies as it spent on its police force.

This is a claim disputed by the Association of Mining and Exploration Companies (AMEC)

"It's really a nonsense paper, the data in there is seriously inaccurate and a lot of the numbers are reflective of revenues that are returned to industries through reimbursements, for tenement relinquishment, which don't relate to any subsidisation in the industry whatsoever," AMEC CEO Simon Bennison says.

One of the leaders of the Australia Institute said that mining companies would still be doing what they do in the total absences of subsidies.

The institute's executive director Richard Denniss said that because subsidies do not target the most profitable commodities, the logic or strategy underpinning them may be non-existent.

Peak resource lobby, the Minerals Council of Australia (MCA), has also slammed the report and its authors, saying the real facts are available from the Productivity Commission’s analyses.

MCA chief executive Brendan Pearson said that the Australia Institute, which is widely considered to support left-leaning views, is little more than the research arm of the Greens party.

He said many indirect benefits were not factored-in, and that the Australian mining industry is generally a huge contributor to state, federal and private wealth nationwide.