Extraordinary twist as China's trade war with Australia backfires with our biggest money-spinning export iron ore now set to stay at record levels for longer and earn the nation BILLIONS in extra revenue
China's trade war against Australia is failing with the federal government expecting iron ore prices to stay at elevated levels for longer.
The spot price of iron ore, the commodity used to make steel, this month climbed above $US150 ($A200) for the first time in seven years.
Despite trade sanctions against Australian wine and barley, China has continued to need even more iron ore to feed its infrastructure and apartment building.
Since June, iron ore prices have climbed steadily from $US80, with China sourcing 60 per cent of its iron ore from Australia as Brazil struggles to meet demand.
In the October budget, Treasury expected the commodity price to drop back to $US55 a metric tonne by the end of June 2021.
China's trade war with Australia is failing. Treasury's Mid-Year Economic and Fiscal Outlook is expecting iron ore prices to stay higher for longer
Treasury is now expecting that lower price to be reached later in September next year with government economists notoriously conservative about commodity prices, a key source of government royalties.
Iron ore prices are so high the China Iron and Steel Association had a whinge about it with BHP mining executives.
China bought $70billion worth of iron ore during the last financial year, making it by far Australia's biggest export among the $150billion worth of goods and services sold to the Communist power.
Federal Treasury's Mid-Year Economic and Fiscal Outlook, released on Thursday, also forecast a slightly smaller budget deficit of $197.7billion for 2020-21 down from a $213.7billion deficit forecast in October.
As a proportion of economy, the deficit will shrink from 11 per cent of gross domestic product to 9.9 per cent, which is still the deepest sea of red ink since World War II.
Treasury said the smaller budget deficit was 'primarily reflecting the faster-than-expected rebound in the economy'.
Australia's unemployment rate fell back to a three-month low of 6.8 per cent in November, down from seven per cent in October, the Australian Bureau of Statistics revealed on Thursday.
Despite trade sanctions against Australian wine and barley, China has continued to need even more iron ore to feed its infrastructure and apartment building. Pictured is Chinese President Xi Jinping
Treasury was earlier this year fearing a jobless rate of ten per cent, as a result of the coronavirus shutdowns, but is now expecting it to peak at 7.5 per cent by June next year, even after JobKeeper wage subsidies end and JobSeeker unemployment benefits fall back to $565.70 without the coronavirus supplement.
In more good news, Australian household wealth reached new record highs in the September quarter thanks to a recovery in house prices and stronger superannuation balances.
Average household wealth rose by $6,850, or 1.6 per cent in just three months, to $441,649, a CommSec analysis of ABS data showed.