The World Bank’s gloomy prediction for the slowing Chinese economy is likely to hit Australia hard.

Iron Ore prices are expected to keep falling as China moves from an investment-led economic model to one fuelled by consumption.

This makes Treasurer Hockey’s job all the more difficult: He was struggling to balance the federal budget when iron ore commanded a price of $60 a tonne. The price is now $35 a tonne and still plummeting.

“There seems to be no floor,” said Mr Hockey, referring to iron ore prices.

With less than four weeks between now and his second budget Mr Hockey is scrambling to find a way to plug the ever widening revenue gap and maintain some semblance of control over the Australian budget. To make this even more difficult he needs to fill this hole without breaking any election promises.

A tall-order indeed. Australia suffers contracting growth rates fuelled by dwindling prices for key exports, shrinking mining investment and production, and a freefalling Aussie dollar.

China’s growth rate has dropped 0.3 of a per cent since 2014 to 7.1 per cent in 2015. The World Bank is forecasting further drops of 0.1 per cent in 2016 and 2017.

Asia-Pacific nations (like Australia) with tight trading ties to China are the most likely to suffer from this decline in growth.

Mining mogul Gina Rinehart caused a sensation this week when she was quoted in The Australian as saying Australia could become the ‘Greece of the south’ if changes were not made to the federal budget.

The combination of record household debt and lost trading revenue means some hard decisions need to be made – and made fast.

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