Iron ore price has Budget on the rocks

With an iron ore price almost $US30 ($32) a tonne below where his Budget needs it, Treasurer Mike Nahan has refused to rule out tax increases or spending cuts this year.

The State Budget assumes a full-year average iron ore price of $US122.70 a tonne for 2014-15.

Every dollar less costs the Budget about $49 million in revenue from mining royalties.

With the Government projecting a surplus of just $175 million for 2014-15, even a $US100 full-year average iron ore price would mean a $1.1 billion Budget hole.

Premier Colin Barnett has said low prices will be offset by bigger volumes of ore but Dr Nahan admitted yesterday it was a "concern" that it was August and the price had not recovered.

"It's been hovering around in the $90s for four months," he said.

"Our forecast was $122. Clearly, it's an issue.

"I look at the price every day and it is something that we're going to have to address.

"The commitment the Premier made at the Liberal Party State conference is that we will achieve a surplus."

Asked if this meant tax rises or spending cuts - including job losses - Dr Nahan said: "I'm not going to rule anything out or in."

Shadow finance minister Ken Travers said the Government was about to reap the consequences of poor fiscal discipline.