The Shadow Treasurer Dr Steve Thomas said today that the current iron ore price declines were utterly predictable, as he in fact predicted in published articles back as far as April this year.
The iron ore spot price has already fallen below the level of the assumptions that underpin the state budget handed down just one week ago.
“The current price is half the May 2021 peak of US$235 per tonne, and the drop has occurred within just 4 months, including a fall overnight of over 6%” Dr Thomas said.
“Importantly, the iron ore price has already dropped below the state budget iron ore assumption for the full 2021-22 ????nancial year of US$121.30 per tonne.”
“If the decline continues the budget forecast for this year is under threat effectively from day one.”
The State Government loses around $820 million for every US$10 drop in the average annual price of iron ore.
“The Premier and Treasurer Mark McGowan has strained his credibility by taking credit for the current ????nancial boom, including the massive $5.6 billion windfall budget surplus which in reality is due to huge iron ore royalty revenues” Dr Thomas said.
“If he really responsible for the boom it is now time for him to now also take responsibility for the downside risks.”
“Concerningly, it is unclear where the ????oor is in iron ore prices. The current precipitous price drop is occurring before Vale has fully ramped up its production in Brazil and before China reacts to the recent announcement of the AUKUS defence agreement”.
“It was only six years ago that iron ore prices dropped below US$40 per tonne in 2015. If such a result was repeated the budget implications would be dire” Dr Thomas said.
“It is time for some honesty from the Government. The Treasurer needs admit that he is has no control over the price and the windfall revenues his Government has received, and that he has taken credit for the good luck of worldwide stimulus boosting steel demand and iron ore supply problems elsewhere.”
“He then needs to outline his economic and ????nancial plans for how he intends to respond if iron ore prices continue to decline.”