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Trump gives helping hand to federal budget

AAP logoAAP 14/11/2016 Colin Brinsden, AAP Economics Correspondent

The Turnbull government's expenditure review committee will have had some good news to consider when it gathered in Melbourne as commodity prices continued to go from strength to strength.

The ERC met on Monday, around a month out from the expected release of the mid-year budget review.

The unexpected US presidential win by Donald Trump has given commodity prices a further fillip on the premise he will pursue his large scale infrastructure policy flagged during the campaign, estimated at between $US500 million ($A662 million) and $US2 trillion.

Iron ore prices jumped to around $US80 per tonne, while coking coal - already on a breathtaking rally in recent months due to mine closures in China - roared to around $300 per tonne.

It could result in billion of dollars of additional revenue for the federal budget.

Resources and Northern Australia Minister Matt Canavan said this was obviously good news, particularly for north Queensland miners, but wasn't getting too carried away.

"There remains concerns that the recent price increases may not be sustainable," Senator Canavan told 4CA Cairns radio.

"It's been a very difficult couple of years, so some are cautious about anticipating good news. But certainly in the week since the US election, this is good news on top of good news."

Treasury assumed an iron ore price of $US55 when putting together the May budget, while metallurgical or coking coal was estimated at $US91.

The theory goes for every $US1 rise in the price of iron ore, the government gains $250 million in revenue a year.

Likewise, it is also estimated every $US1 rise in the coking coal price delivers a $65 million boost to the budget.

Treasury determines its commodity price assumptions on the average of the four preceding weeks leading up to the mid-year economic and fiscal outlook.

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