WEST Australian Treasurer Mike Nahan has confirmed the government is facing a budget deficit with a “ballpark” figure of $1 billion as a result of an “unprecedented” drop in the iron ore price and its subsequent revenue for the state.

Dr Nahan said official deficit figure would be revealed in the state’s mid-year review when it is released today.

It will be the first budget deficit since 2000 and go against Premier Colin Barnett’s promise in 2009 that he was “not going to lead a government that goes into deficit”.

Dr Nahan said the review would highlight the “unprecedented” drop in royalty revenue which he said was in excess of $7bn over the forward estimates.

“This will also build reductions in tax revenue and, of course, more recently a reduction in royalties from oil,” he said.

“We expect to, as announced earlier, have a sizeable budget deficit for 2014-15 and potentially a budget deficit in the next year.”

The impact of the downturn in commodity prices is having a much more severe effect in Western Australia than in Queensland, where the fall in coal royalties from lower prices was largely offset by higher stamp duty on real estate sales.

Although Queensland’s deficit this year of $2.8bn is about $500 million more than expected, the state government still expects to record a small budget surplus in 2015-16.

Western Australia has been shaken by the collapse in the iron ore price, which has more than halved this year to $US70, its lowest price in more than five years.

The state government’s 2014-15 budget from May estimates iron ore at $122.70, in contrast with the federal government’s recent updated iron ore forecast of $US60 ($73.60) for next year. The May forecast says iron ore royalties account for about 90 per cent of total royalty income to the state.

WA originally budgeted to collect $5.6bn in iron ore royalties this financial year. Royalties were forecast to increase to $6.2bn in 2015-16 and then a further increase to $6.9bn by 2017-18.

“When we closed off the budget from this year 14-15, the commonwealth forecast was in excess of ours as was Access Economics, ANZ and UBS,” Dr Nahan said.