New South Wales and Queensland, Australian states that account for about half the nation’s economy, today forecast worsening budgets as weaker commodity prices cut mining royalties.
New South Wales projected a A$423 million ($443 million) deficit in the fiscal year starting July 1 compared with a A$289 million surplus projected in a budget release in June. Queensland said its deficit will be A$11.2 billion this fiscal year versus a September estimate of a A$10.8 billion shortfall.
Mining and other resource companies that have propelled Australia’s economy to 21 years of recession-free growth are scaling back projects and shipments as the global economy decelerates. The Reserve Bank of Australia this week said the nation’s terms of trade, a measure of export prices relative to import prices, were likely to be about 15 percent lower this quarter than their 2011 peak.
“The economic outlook for Australia and New South Wales over the next two years is weaker than at Budget time, largely reflecting further downgrades to the global outlook,” according to the mid-year fiscal review released by the country’s most populous state. “A fall in non-rural commodity prices since the budget lowers forecast state revenues from coal royalties.”
Separately today, South Australia said its deficit this year will be A$1.17 billion compared with a prior forecast for an A$867 million shortfall. BHP Billiton Ltd., the world’s biggest miner, in August decided to delay approval of an estimated $33 billion expansion of the Olympic Dam copper, uranium and gold mine in the state.