From Fairfax:
The federal government is cautiously eyeing a windfall gain from soaring iron ore prices in recent days, fuelling hopes of billions of extra dollars flooding into Canberra, but the financial improvement is not being matched by a rise in political certainty.
The optimism comes as Malcolm Turnbull continued to leave room for an earlier budget to facilitate complex double-dissolution election timing, declaring only that the government is “working towards” a May 10 budget as scheduled.
…The high iron ore price would not only undo much of the downgrade of the budget announced in December’s mid-year budget update, but would go along way towards pre-election spending commitments, with potentially $6 billion to $9 billion flowing from higher company profits and corresponding taxes paid.
Visiting the South Australian Olympic Dam, Resources Minister Josh Frydenberg welcomed the recent spike in iron ore prices to above $US60 ($80.5) a tonne and said between that improvement and the innovation undertaken by miners like BHP, the future of the industry is suddenly much brighter.
“The Olympic Dam operations are an example of the resilience of Australia’s resources sector, where the challenges of lower commodity prices have been combated through increased productivity and the use of innovation. Coupled with the long-term positive outlook for global commodity markets, the future continues to look bright for Australia’s world-class industry,” he told Fairfax Media.
With Prime Minister Malcolm Turnbull struggling for funds to support revenue-neutral income tax cuts, rebounding iron-ore prices globally, along with recoveries in both copper and gold prices, could be a major boon to revenue, with each dollar rise in the price, injecting some $250 million into Canberra’s deficit-depleted coffers.
Iron ore is enjoying a short term restocking episode that will likely be in the rear vision mirror by election time. Locking in a larger structural deficit via tax cuts based upon a cyclical blip in revenue would simply be repeating previous Coaltion mistakes.
Two words for ya, Malcolm: Colin Barnett.
