SYDNEY—It is getting harder for the government of Prime Minister Julia Gillard to meet a promise to return to a budget surplus this fiscal year, as iron-ore prices plunge and the country's biggest mining company cancels billions of dollars in new projects amid a slowdown in Australia's resources boom.

Erasing a 44 billion Australian dollar (US$46 billion) budget shortfall is a pillar of the government's economic policy ahead of a general election expected late next year. The revenue to pay for this economic blueprint was supposed...