A truck carrying iron ore moves along a road at the Fortescue Metals Group (FMG) Christmas Creek iron ore mine located south of Port Hedland in the Pilbara region of Western Australia, November 17, 2015. Picture taken November 17, 2015.
A truck carrying iron ore moves along a road at the Fortescue Metals Group (FMG) Christmas Creek iron ore mine located south of Port Hedland in the Pilbara region of Western Australia, November 17, 2015. Picture taken November 17, 2015.

Western Australia is concerned about its falling iron ore prices primarily due to China's slowing property market, which is expected to cause a loss of AU$3 billion to the economy.

Western Australia, which relies heavily on the industry, is fearing an adverse impact on state's economy and the country's budget, prompting calls to diversify its economy.

WA Treasurer Rita Saffioti says the price drop didn't come to her as a surprise as the government foresaw the situation, so they have been careful with their budget and adopted conservative price estimates.

Despite the overall decline in iron ore prices, Australia's economy is nevertheless robust. To secure long-term stability and prosperity, experts believe Australia should refocus its attention from iron ore—a significant contributor to economic growth—to other industries for sustained growth.

"We're not feeling great about that prospect," Saffioti told reporters on Monday, ABC News reported.

The sharp drop in iron ore prices, is estimated to cut AU$3 billion from revenue. Prices have fallen 38% since the start of the year, much lower than expected, and may reduce tax income, causing budget strain in the coming years.

Treasury predicts Iron ore prices are to reach $US60/ton by March 2025 but the Chinese steel sector is fearing a far severe decline which could throw the market into a complete disarray, Courier Mail reported.

The WA government is taking cue from its past experiences and is being cautious about its iron ore price predictions to avoid financial shocks. "There's always criticism when we release our budgets with very conservative estimates, but having that conservative estimates allow us to buffer from these movements," Saffioti told ABC.

Chamber of Commerce and Industry WA chief economist Aaron Morey said the state is well positioned to deal with the price slump.

"Undoubtedly, the lower those iron ore prices come, the bigger the impact on the budget," he said.

"In coming years, there will be disruption if there is a significant slowdown in China's economy, but overall our economy is still really strong."