The West

Budget blow as iron ore price falls again
Budget blow as iron ore price falls again

The WA and Federal Budgets have been dealt fresh blows with iron ore prices falling to their lowest level since 2009.

In overnight trade, spot iron ore fell to $US86.70 a tonne. It was the lowest price since September 9, 2009.

ANZ analyst Mark Pervan said cuts in steel production across China were feeding into the lower prices which have fallen by 9.2 per cent over the past month.

"Chinese economic sentiment remains weak with concerns surrounding deleveraging and a down-cycle in property prices," he said.

The fall in price, if maintained, will have a dramatic impact on the State Budget.

Every dollar fall in the average iron ore price costs the Budget $49 million in lost revenue.

The Budget forecast iron ore to average $US122.70 a tonne through 2014-15. At current trends, it will have to average well over $US140 a tonne for the rest of the year to deliver on the Budget forecast.

The Budget is also predicated on the Australian dollar averaging US90.6 cents through the year. It is still around the US93 cent mark.

A lower dollar would help offset some of the impact of the depressed iron ore price.

The falling iron ore price will also feed into the profits of key miners such as BHP Billiton, Rio Tinto and Fortescue Metals Group which will then feed into Federal company tax collections.

The West Australian

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