The falling iron ore price is set to rob about $1.5 billion from coffers of the state of Western Australia, reveal new estimates.
Western Australia, has the largest exposure in the country to the plummeting iron ore prices, which are down 30 per cent over the past three months, and are currently at just below $90 a tonne.
The price decline has already cost the state government around $150 million in revenue over the past two months, according to estimates by the international financial services firm UBS.
Premier Colin Barnett is likely be shocked as his carefully planned 2013 budget has been built on a few assumptions of which the iron ore price and the Australian dollar were two.
According to the forecast by the state government, the iron ore price would be at an average of $128.80 for the rest of the financial year and the Australian dollar would be worth about US90.6 cents.
Traditionally, according to UBS, the Australian dollar would have tracked downwards following the iron ore price, but thanks to the global economic volatility, the currency had remained strong despite the commodity price cooling off.