Australia's government says its budget deficit is expected to worsen by 2.3 billion Australian dollars ($1.7 billion) due to the plunging price of iron ore, a key export.

The government released its mid-year budget review on Tuesday. It predicts an AU$37.4 billion deficit for the financial year ending June 30, 2016. That's a jump from the $35.1 billion predicted earlier this year.

The economy's potential growth rate for the fiscal year was downgraded from 2.75 percent to 2.5 percent.

Australia relies on Chinese demand for its commodities, particularly iron ore, to help keep its economy afloat. But the price of ore has plummeted as Chinese demand wanes amid its economic slowdown.