Treasury warned tax receipts could fall short

ABC NEWS (Australia)

Treasury has warned that tax receipts could fall short. By three billion dollars because of the tumbling Iron ore price. Though predictions on iron ore prices have gotten investors scratching their heads.

Transcript

00:00Treasurer Jim Chalmers issued a statement last night with Treasury's analysis of the

00:06iron ore market, pointing out that the price of Australia's largest export was now $81.80

00:12a tonne, below the price the Treasury had assumed for the budget, which was $83.

00:18Now I must confess to being rather confused by this, because when I look on Bloomberg,

00:22the iron ore spot price is $92.85.

00:27The answer is that Treasury's assumed price is FOB, that is it doesn't include freight.

00:33Everyone else quotes CFR, which does include it.

00:37These are the two lines on the graph, FOB and CFR, with Treasury's assumption as a green

00:42dotted line.

00:43I suppose the main reason for yesterday's statement, apart from warning us that tax

00:47receipts will be short $3 billion, and don't blame us, was to show that they got it right,

00:53and that it's not a hollow log after all.

00:57The iron ore miners and their shareholders will be hoping that Treasury is not right

01:00about what happens next, which is that it keeps falling to $60 a tonne, FOB of course,

01:07which means an actual CFR spot price of about $70.

01:11So as discussed, the iron ore price fell to a new two year low of $92.85 over the weekend,

01:18but the big one on commodity markets is gold, up 2% to a new all-time record high above

01:24the $2,500 US announce.

01:27The iron ore miners all fell, but the market closed with a small rise, its 7th in a row,

01:32which is the longest winning streak since 8 in a row in January.

01:35A2 Milk dropped almost 20% after missing profit expectations, while software firm Nuix jumped

01:4225% after beating them.

01:44The US market bounced back from a fall on Friday, and the Aussie dollar went up against

01:48the US dollar but fell against the yen and the kiwi.

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