By Alasdair Pal
SYDNEY, May 9 (Reuters) - Australia raised its long-term commodity price assumptions in the country's annual budget on Tuesday, in a move that the government expects will contribute billions of dollars in extra revenues. Australia's Labor government on Tuesday boasted the first budget surplus in 15 years as strong jobs growth and bumper mining profits swelled its coffers, but it will quickly be swallowed up by spending on everything from health to energy and defence. Budget papers showed price assumptions of four key commodities "increased modestly" to take account of inflation in the mining industry and disruptions in supply following Russia's invasion of Ukraine. "The commodity price assumptions remain conservative and at the lower range of market forecasts," the papers said.
Australia, the world's largest iron ore exporter and the second-largest exporter of coal, now assumes a long-term iron ore spot price of $60 per tonne, up from $55 per tonne at the interim budget delivered in October. A $10 per tonne increase in iron ore prices would add A$5.2 billion ($3.5 billion) to nominal GDP in the 2023-4 fiscal year, and A$500 million in tax receipts, according to Treasury analysis. Treasury figures showed it also hiked its thermal coal spot price assumption to $70 per tonne from $60 per tonne over the same period. Both figures are still significantly lower than current spot prices of $120 for iron ore and $170 for thermal coal.
Assumptions for metallurgical coal and liquefied natural gas also rose. "A series of significant and interrelated shocks have affected global commodity markets in recent years," budget documents said. Russia's invasion of Ukraine in early 2022 saw a significant disruption in oil and gas flows, while major weather events hit Australian coal and Brazilian iron ore production.($1 = 1.477 Australian dollars) (Reporting by Alasdair Pal in Sydney Editing by Sam Holmes)
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