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Australia has felt the ripple effect of a weaker Chinese economy as it is set to cut A$8.5bn ($5.4bn) from its budget estimates due to lower anticipated income from mining taxes over the next four years.

Jim Chalmers, Australia’s treasurer, said on Monday that slower growth in China would have a “significant impact” on the Australian economy in the coming years, ahead of revised budget forecasts to be published on Wednesday.

The Treasury will lower anticipated export revenue from the country’s mining sector by A$100bn in the four years to 2028, according to Chalmers, with anticipated taxes reduced by A$8.5bn over the same period as a result.

“This just reflects the reality of less demand out of China,” he said, citing weak iron ore prices and lower volumes of minerals being exported to the country due to its soft economy.

The trading relationship between China and Australia has been in focus in recent years after Beijing imposed a series of sanctions on some Australian goods, including coal, wine, cotton, seafood and barley, in 2020.

Australia withstood that pressure and China remained its largest trading partner due to its reliance on the Pacific country’s natural resources for its industrial growth.

China accounted for nearly a third of Australia’s exports in 2023, worth A$219bn, according to government data. That was down from 38 per cent in 2020 but still represented 8 per cent of Australia’s GDP, according to UBS.

A softer Chinese economy in 2024 has hit commodity prices, including iron ore, which accounts for more than half of the value of exports to China, and lithium. That has had a knock-on effect in Australia’s powerful mining sector, which has remained optimistic that demand from growing sectors such as renewable energy and carmaking might help offset a slump in China’s property sector.

Australia’s economic growth has slowed this year due mostly to weak consumption and declining productivity. Third-quarter GDP growth was weaker than expected and has cast doubt over the resilience of the Australian economy.

Chalmers noted on Monday that Australia’s trading relationship with other countries would “evolve over time”. He said there had been a “stunning transformation” of the Chinese economy that was set to continue in consumer-focused industries.

“We have been a big beneficiary of that and I think we’ll be a big beneficiary of it into the future as well,” he said of the “very productive and prosperous relationship with China” that Australia enjoys.