Australia's economic growth should remain unchanged even though iron ore prices are collapsing, according to a new research note from JP Morgan.

However, the collapse in tax revenue will leave the Federal Budget billions of dollars a year worse off than estimated by Federal Treasury, said the bank.

In the note, "Calibrating the Aussie macro forecasts to lower iron ore prices", JP Morgan said they had revised down the price of iron ore this year by nearly 30 per cent.

Currently trading at just over $US50 per tonne, iron ore is expected to reach a nadir of $US43 a tonne in the September quarter, said the bank, before slowly recovering to $US51 at the end of the year.

The research note listed seven main areas that the impact will be felt.

1. On the budget deficit, "our forecasts...for some time have been more pessimistic than those of the Treasury, and they remain so. We have anticipated a deficit of $45 billion in the current fiscal year, and $35 billion in the year ended June 2016, around $5 billion worse per year than the Treasury forecasts."

2. Despite the risk to real economic growth from iron ore production cuts and deferred capital spending, "on each of these, though, we do not anticipate material changes, so the damage to real GDP growth is minimal."

3. Although real GDP growth will not be affected, the lesser-used nominal GDP measure - in which inflation is not taken into account - may lose another 1 per cent or so from growth over time.

4. Terms of trade - the price of exports relative to the prices of imports - will be 16 per cent lower compared to 2014 instead of the 9 per cent drop previously forecast by the bank;

5. The balance of payments will remain unaffected, with higher exported volumes of iron ore and LNG being counterbalanced by a drop in the value of the Australian dollar and lower iron ore and oil/gas prices

6. For official interest rates, the bank said that the Reserve Bank would deliver one last cut - to 2 per cent - in May. However, it did not rule out lower rates: "the risks of a sub-2 per cent cash rate have increased".

7. There was no change in the bank's forecasts for the Australian dollar (71 US cents by the end of the year).

Long-term, the bank have forecast that iron ore will trade at $US50 per tonne in December 2016, $US56 in December 2017, and $US64 in December 2018. Beyond then the commodity will recover to $US75.

Citi and UBS have also put out revised iron ore forecasts in the past week. UBS tip prices will be at $US50 in December 2015, $US48 in December 2016, $US53 in December 2017, and $US55 in the long-term.

Citi, in a very bearish forecast, have revised iron ore down to $US37 a tonne in the second half of this year, and $US40 per tonne until the end of 2018. Federal Treasurer Joe Hockey has stated that iron ore could fall to $US35 per tonne this year, blowing a $25 billion hole in the budget over four years.