The Australian government expects the iron ore price to be US$60/mt on FOB basis over the next two years, according to the mid-year economic outlook issued by Australia's Treasury. Iron ore prices have unexpectedly fallen by over 30 percent since the first budget estimates in May this year.
The Treasury said that the fall in iron ore prices has led to company tax receipts being revised down by A$2.3 billion in 2014 15 and A$14.4 billion over the forward estimates.
However, the mid-year economic outlook suggests that the government still expects solid growth of real activity in the economy to continue despite the sharply lower iron ore prices. To avoid detracting from economic growth, the government has not resorted to cutting expenditure dramatically or increasing tax amid sharply lower iron ore prices.