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NUMBERS OUT: The state government made a costly miscalculation on long-term iron ore prices

From bad to worse on budget

The slump in iron ore royalties is going to hurt the state’s already parlous budget position.

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The price of iron ore for delivery to the port of Tianjin in China was trading at $US71.10 a tonne this week, a rise of 2.3 per cent. However this may not be sustainable. The Chinese real estate market is tipped to decline putting pressure on the ore price The current strategy of miners is to increase supply in an attempt to retain the same level of revenue as demonstrated by a 20% increase in iron ore shipped from Port Hedland this month as compared to the same month last year While the Brazilian company Vale remains the largest competitor to Australian ore producers it also will suffer from the lower prices rendering certain levels of shipment unprofitable Vale's hopes of retaining the price at current levels rely on lower cost producers being forced out of business thereby reducing supply This philosophy of course is based on no change in Chinese demand

I think we all had an idea we were going from "bad to worse" a few months ago. Each day we read people a losing their jobs, fire sales of Government owned assets and yet there appears to be little reaction from the Barnett Government to change their financial course. The stadium should have been put on the back burner months ago, but the government was either too slow to react or simply chose not to. If he was the captain of a ship he would be walking the plank. No seriously, times are going to get tougher and the people of WA cannot continue to prop up bad fiscal decisions. Given Mr Barnett taught Economics at Curtin maybe he needs to go back to his grass roots. In tough times, luxury items are not built nor bought.

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