Budget iron ore revenue halves in 3 days

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In Bozo Joe’s recent Budget he forecast an iron ore price of $48. However, that price was FOB which does not include the cost of delivery which is around $6 per tonne. Thus the Budget forecast was actually a CFR (or spot) equivalent price of $54 in the forward estimates.

The cheapest iron ore production in the country is that of RIO in the mid $30s, being generous. Hence, three days of iron ore price crashes from $54.10 to $44.10 essentially just halved the Federal government tax take for iron ore in the forward estimates.

The iron ore income shock is nearly over because once we pass through the mid $30s there is no income left.

That structural adjustment to mining-led growth is really delivering now.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.