Treasurer Troy Buswell has conceded the State Government may deliver a budget deficit this financial year despite $330 million of public sector cuts unveiled last month.
Mr Buswell said the combination of a weaker-than-forecast iron ore price and a stronger-than-expected Australian dollar made for "difficult circumstances".
"We're working hard to deliver a surplus but it is in very difficult circumstances," he told ABC radio this morning.
He said for every dollar the iron ore price varied from the forecast of $US127/t it cost the government about $33 million.
Similarly for every cent the Australian dollar varied from US99c it cost about $50 million.
Asked if a budget deficit for 2012-13 was a possibility, Mr Buswell conceded it was "always a prospect".
"But it's something we're working very hard to avoid," he said.