Australia's projected annual deficit worsens by $3.2 billion

Australia's projected budget deficit for the current fiscal year has increased by 4.4 billion Australian dollars ($3.2 billion) to AU$41.5 billion as the economy continues to slow following a China-driven mining boom, the government's latest forecasts showed Monday.

The deficit for the year ending June 30, 2017, had been forecast to reach AU$37.1 billion when the annual budget was released in May.

But updated economic forecasts released Monday said growth in the AU$1.7 trillion economy had slowed to 2 percent for the year from the 2.5 percent expected in May.

Higher prices for iron ore and coal — Australia's biggest exports — would increase profits in the mining sector and increase the tax paid by mining companies, documents said.

"However this will be more than offset by the impact of weaker growth in aggregate wages and non-mining profits," the forecast said.

Analysts say Australia risks losing its coveted triple-A credit rating by early 2017 due to the worsening economic performance. Fewer than a dozen countries have a triple-A rating from Moody's Investors Service, Standard and Poor's Global Ratings and Fitch Ratings Inc.

Treasurer Scott Morrison said in a statement that the budget would return to surplus in 2020-21.

The budget forecast comes after the Australian Bureau of Statistics said earlier this month that the economy contracted in the September quarter for the first time since early 2011.

The economy contracted by 0.5 percent over the three months, pushing the annual growth rate down to 1.8 percent, the bureau said.

Growth in the year through June had been 3.1 percent.

Morrison would not speculate on whether the December quarter would also contract, technically creating Australia's first recession in 25 years.