The government has given into the pressure from the big miners and formally abandoned the idea of a parliamentary inquiry into the iron ore sector.
Treasurer Joe Hockey announced late Thursday that “after discussing the issue with regulatory bodies and stakeholders across the resources sector, the government will not be initiating an inquiry at this time”.
Andrew Forrest, from Fortescue Metals Group has been lobbying hard for an inquiry, and independent senator Nick Xenophon strongly backed the idea.
Forrest said it appeared the wishes of the multinational mining giants had prevented an inquiry. “This denies the Australian people the opportunity to shine a light on the iron ore industry and to understand whether it has been operating as an open market.”
Initially the government favoured the idea of a joint parliamentary inquiry under a Liberal chair. But BHP Billiton and Rio Tinto reacted strongly – they and commentators seeing it as sending out anti-market signals to the world. After being publicly supportive Prime Minister Tony Abbott went into retreat.
Xenophon said on Thursday night that he would keep pushing for an inquiry. But with neither government nor Labor backing one, he can’t get the numbers in the Senate.
Last week Xenophon tabled terms of reference for a Senate economics committee inquiry.
He said he had deferred the vote on the basis of an understanding that the government would set up its own joint parliamentary inquiry.
Xenophon said his move for an inquiry followed the $18 billion budget hit from the decline in the iron ore price and Forrest’s allegations that BHP Billiton and Rio Tinto were flooding the market, putting the squeeze on smaller competitors and reducing tax revenue.
“The fact that the PM and the Treasurer were initially supportive of an inquiry by both houses of parliament and have now backed away is indicative, yet again, of the enormous and disproportionate power of the mining lobby,” Xenophon said.
“You’ve got to ask, given this extraordinary turn of events: where does the real power lie in this country?”
Xenophon said that in the recent Senate inquiry into multinationals’ tax minimisation, it was revealed that BHP and Rio used off-shore “marketing hubs” to slash their tax. Smaller miners such as FMG had not used such practices, which meant they were at a competitive disadvantage.
The Minerals Council of Australia praised the government’s back off, saying it “will enable Australia’s iron ore sector to focus on the task of further strengthening its competitiveness in a fiercely contested global market.”
Opposition leader Bill Shorten said the government had damaged the industry.
It had been a debacle, with Abbott taking too long to admit he was in error. “This speculation has given our international competitors an advantage – they will make the most of this,” Shorten said.