“Despite the challenges, the government has made a good start on budget repair – there is more work to be done but we are on the right track,” the Treasurer said at a press conference this afternoon.

“As a result we have better jobs growth and greater prosperity, a more resilient budget that helps us cope with unexpected adversity. We need a strong budget to help us have a strong economy.

“For example, iron ore – which is one fifth of our nation’s export dollars – has fallen from $US120/t at the beginning of the year to about $US60/t today.

“Income volatility from exports can, however, have a negative impact on our economy and on the budget bottom line.

“When external events turn against us, our domestic budget strength needs to cushion the blow.”

The Treasurer said as a result of result events he expected tax receipts to fall by $A6.2 billion this year and a total of almost $32 billion over the next four years.

He said company and income tax receipts were also expected to be down sharply, both in the order of $A2.3 billion this year.

“To try and recover these falling revenues now through new or higher taxes would unquestionably harm the Australian economy.

“Falling wage growth has also had an impact on both revenue and expenditure.”

Although the senate had passed the great majority of the government’s budget, Hockey said there were still a number of outstanding structural savings yet to be passed.

“Negotiations in the senate this year for the repeal of the mining tax have cost $6.6 billion over the next four years, but the costs will be more than recovered by the end of 2023.

“The failure of the senate to accept all of the government’s policies has cost the budget $10.6 billion, and there is a further $34 billion of savings still to be legislated.”

Budget estimates for the 2014-15 budget have been updated today, with underlying cash balance being revised to a forecast of negative $40.4 billion, worsening from the negative $29.8 billion projected in the May budget.

After being around $US125/t on average over 2013, the iron ore price had fallen substantially since the beginning of the year.

The iron ore price is currently sitting at around $69/t around its lowest level since 2009.

“The extent of the fall in the price was widely unexpected,” the MYEFO report said.

“At budget, treasury expected the iron ore price to fall in line with increasing global supply, primarily from Australia, and softening demand from China.

“The spot price was expected to fall from around $95/t at the time of the budget to $92/t by June 2016, having started the year at more than $120/t.”

While low-cost mines in Australia and Brazil were expected to continue to expand global supply, on the demand side China's growth outlook for 2015 had been downgraded.

“The price of iron ore is consequently expected to remain around $60/t over the forecast period. There is considerable uncertainty around this forecast, but this is assessed to be broadly balanced.”

The MYEFO report also suggests a recovery in the global economy, but at a slower rate than expected at budget time.

The US was leading advanced economy recoveries, but there had been a loss of momentum in both the euro area and Japan.

“China's economic transition towards more sustainable growth and a slowdown in its property market are weighing on iron ore and coal prices,” it said.

“The majority of world growth is still expected to come from emerging market economies, predominantly those in our region, with world growth expected to pick up to 3.75% in 2015 and 4% in 2016.”

Australia's major trading partner growth is expected to continue to exceed world growth, with forecasts of 4.5% in 2015 and 2016. This reflects the relative and increasing importance of fast‑growing east-Asian economies within our export markets.

“The most immediate risk to the global recovery is the euro area, which faces the possibility of a long period of subdued growth and low inflation. The long period of relatively calm financial markets and rising asset prices could be reversed by a variety of triggers, such as increased geopolitical tensions. Any such reversal could potentially weigh on confidence and growth.

“Finally, while China's transition to more moderate but sustainable growth will underpin increasing prosperity and a burgeoning middle class, this transition may not be smooth.”