MELBOURNE, April 13 (Reuters) - The Australian government is set to slash revenue forecasts by a further A$25 billion ($19 billion) over the next four years as it factors in iron ore prices sliding to $35 a tonne, Treasurer Joe Hockey said in an interview with the Australian Financial Review.
That price for iron ore, Australia’s biggest export, is below the current decade low of about $47 a tonne and sharply below the $60 a tonne assumed in the government’s budget update last December.
“There seems to be no floor. We are contemplating as low as $35 a tonne,” Hockey was quoted saying in the interview.
He said every $10 fall in the iron ore price represented around A$2.5 billion a year less in revenue.
“If the Australian dollar comes down, it cushions the blow a bit,” he said.
Hockey said Chinese iron ore producers had failed to cut output as mega-producers Rio Tinto and BHP Billiton had expected, which has exacerbated the price drop, and it was up to the companies to explain why, the newspaper said.
“I find it very difficult to step into the heads of chief executives because a number of them are quite short-term in their thinking,” he said.
$1 = 1.3034 Australian dollars Reporting by Sonali Paul; Editing by Eric Walsh