STOCK MARKET WATCH -- Monday, 15 December 2014

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18. Australian Budget Gap Widens More Than Forecast on Iron Ore

http://www.bloomberg.com/news/2014-12-15/australia-s-budget-deficit-widens-to-a-40-4-billion-on-iron-ore.html

Australia’s government forecast a wider budget gap this year as plunging iron ore prices erode tax revenue and spending cuts are blocked by opposition lawmakers.

The underlying cash deficit will deteriorate to A$40.4 billion ($33.2 billion) in the fiscal year ending June 30, 2015 from a May estimate of A$29.8 billion, Treasurer Joe Hockey said in the mid-year economic and fiscal outlook today. The government forecast unemployment will climb to 6.5 percent by mid 2015, higher than its May projection of 6.25 percent.

“We are now witnessing the largest fall in the terms of trade since records began in 1959,” Hockey told reporters in Canberra, referring to export prices relative to import prices. “This has been faster and deeper than anyone expected.”

Tony Abbott’s Liberal-National coalition, which was elected 15 months ago promising to end the “debt and deficit disaster” of the former government, has faced Senate opposition to savings measures while falling prices of key exports have cut tax revenue. The fall in iron ore prices is forecast to reduce company tax payments by A$2.3 billion in 2014-2015 and A$14.4 billion over the forward estimates, today’s documents showed.