The Sunday Times revealed last month that the collapse of the iron ore price had left the Barnett Government facing a $1.3 billion budget deficit – the state’s first in 15 years.

Treasury recently awarded mining industry consultants CRU a contract to provide regular iron ore market updates and industry cost curve data. But the contract does not include an iron ore price model.

Shadow treasurer Ben Wyatt said the consultancy move was recognition the Barnett Government had got its iron ore forecasting “horribly wrong”.

“If they (the contractors) have any influence on putting the handbrake on Mr Barnett aggressively speculating on the iron ore price then that has to be a good thing,” Mr Wyatt said.

Iron ore recently hit a five-year low of $US68 a tonne, which is little more than half the prediction of $US122 a tonne in May’s state Budget.

The Government now expects iron ore royalties to be down $7 billion on the forward estimates.

Treasurer Mike Nahan has insisted a price fall of this magnitude was “not foreseeable”.

“Even the world’s leading investment banks and commodity forecasters did not predict the precipitous drop in iron ore prices,” he said.

“This awarding of this contract is in recognition of both the growing importance of iron ore royalties to the state Budget, and the growing complexity and volatility of the iron ore market, such as the shift towards spot and short-term index pricing and the growing use of derivatives.

“In this latter regard, the iron ore market has changed fundamentally from the days of annual benchmark contract pricing, and continues to evolve. ”

Mr Nahan recently had to defend paying former newspaper journalist Robert Taylor almost $120,000 to work as a media consultant on the midyear review and the next Budget.

Treasury has previously hired London-based CRU for an independent assessment of expected production volumes from WA producers.

A spokesman said the contract was for one year only, and the costs would be met from Treasury’s existing budget.

A Budget deficit of $900 million is expected in 2015/16, before a return to surplus.