Treasurer Jim Chalmers is warning that China’s slowing economy will dampen iron ore prices and hit the budget bottom line by up to $3 billion after a 7.5 per cent slump last week pushed prices below Treasury’s forecasts.

After starting the year around $US144 a tonne on hopes of a strong Chinese economic rebound, iron ore prices have fallen sharply as property, share and credit markets in Australia’s largest trading partner have all taken a turn for the worse.