(Transcript from SBS World News Radio)
Mining giant Rio Tinto says a Senate inquiry into iron ore prices might send a negative message to the rest of the world.
But Prime Minister Tony Abbott says an inquiry could make sense, although no decision has been made.
There are claims that the big two mining giants, BHP Billiton and Rio Tinto, are flooding the market and pushing down the price in order to wipe out smaller competitors.
Mr Abbott says his government does not interfere in free markets but believes it is important to get facts on the industry.
Amanda Cavill reports.
(Click on the audio tab above to hear the full report)
Rio Tinto's chief executive for iron ore, Andrew Harding, says Australia's economic development has been underpinned by being a global champion of free trade and open markets.
Mr Harding says Australia should be careful not to disturb this hard earned reputation.
But Mr Abbott says the government wants to get to the bottom of what he calls "claim and counter claim" about what's happening inside the iron ore industry at the moment.
"Obviously, iron ore is an incredibly important industry for our country, it's our principal export. Obviously, if the iron ore price is high that's good for government revenue; if the iron ore price is low, government revenue takes a hit. So, the iron ore price impacts on our country in many, many ways. The profitability of the big iron ore companies is important for investment, it's important for employment, as well as for company tax revenue, which then goes to the government and helps to fund services. So it's important to get to the bottom of this. "
Mr Abbott's comments come after Independent senator Nick Xenophon failed to win support for an inquiry in the Senate last week.
The Prime Minister's qualified support for an inquiry so soon after Senator Xenophon's push failed is being seen by some as a sign that the federal government wants control of the inquiry when it is established.
Opposition Treasury spokesman Chris Bowen says the issue is an important one.
He says Labor would cooperate with an inquiry, but the government has to make its mind up about whether it will go ahead with one.
"This is obviously an important matter. Iron ore prices impact on the budget, they impact on the national economy. And there is a lot of speculation about various matters. If there is any improper conduct alleged that is best investigated by the ACCC, but if there is a parliamentary inquiry that is obviously something Labor would facilitate and participate in. But the government needs to come a decision about whether they would support one or not."
Treasurer Joe Hockey says the government will be making a decision about an inquiry in the next few weeks.
But it appears not all of the Cabinet is behind the move.
Trade Minister Andrew Robb and Industry Minister Ian Macfarlane, who are intimately involved in the mining portfolio, are reportedly against a parliamentary investigation.
They're concerned it could negatively affect investment in Australia's mining industry.
Rio's Andrew Harding has told the ABC claims the big miners are manipulating the market price of iron ore are wrong and an inquiry would achieve nothing.
"Completely false. Rio Tinto is pursuing a long flagged strategy to increase its production into a growing iron ore market that's growing over the long term and as the market grows and more and more tonnes are demanded by more and more people as the population increases around the world, we'll be there to provide those iron ore tonnes. And if we don't do it, somebody else will." "a
But Fortescue Metals Chief Andrew "Twiggy" Forrest says the behaviour of the big miners is anticompetitive.
Mr Forrest told a recent business dinner it's in Australia's best interests to look into what's going on.
"And when you're just driving for market share at any cost and you're smashing the revenues of your host nation, and you're smashing the revenues of your shareholders, in the end you smash your own personal credibility. Why don't these those companies who derive their fortunes from our nation act like grown ups and just agree to cap their production?"
Independent Senator Nick Xenophon says he intends to put a motion in the Senate again to look at the volatility in iron ore prices, which has caused havoc for both federal and state revenues.
This would be in addition to any government-driven investigation.
