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  • Written by The Conversation
imagePrime Minister Tony Abbott is in a nasty squeeze, with Andrew Forrest, founder of Fortescue Metals Group, and some of the other smaller miners on one side, and the big producers, BHP Billiton and Rio Tinto, on the other.AAP/Dan Himbrechts

Tony Abbott has got into a terrible tangle over whether there should be an inquiry into iron ore prices.

After encouraging the idea on Friday and Monday, the Prime Minister on Tuesday appeared to be stepping back from it.

One day he saw an inquiry as potentially “a very good way” to get at the facts and sort out the “claims and counter claims”, the next he was saying “there has never been any proposal from this government for an inquiry. The proposal has always been from Nick Xenophon”.

As he might himself put it, there’s been a touch of the Abbott weathervane in evidence.

The Prime Minister is in a nasty squeeze between Andrew Forrest, founder of Fortescue Metals Group, and some of the other smaller miners on the one hand, and the big producers, BHP Billiton and Rio Tinto, on the other. He’s also being very publicly stared down by a couple of his cabinet ministers. It’s awkward.

Forrest, a man who’s had influence with both sides of politics, is campaigning for an inquiry, saying that the big miners' repeatedly-stated plans for expanding supply have pushed down the iron ore price. The public has a right to transparency, he told the ABC on Tuesday night, claiming also this would “correct” the big miners' behaviour.

It should be noted that Forrest, with a higher cost enterprise than the big companies, has a lot of commercial skin in this game.

In response, BHP Billiton and Rio Tinto point out that if they stand still they give a competitive advantage to overseas competitors, especially the Brazilian multinational Vale, to grab more market share.

Independent senator Xenophon took up the Forrest cause, trying to get support for a Senate inquiry, urging the case to Treasurer Joe Hockey and Abbott.

But the grillings that a Senate committee under Labor’s Sam Dastyari gave executives from Apple, Google, Microsoft, News Corp and BHP Billiton over tax minimisation and representatives of the big banks over the scandals in financial advice were fresh in the government’s mind.

Abbott and Hockey believed the best course would be for a joint parliamentary inquiry under a reliable Liberal. The obvious MP was Angus Taylor, who has an impeccable business background, including in consulting to the mining industry, and incidentally also has a Master of Philosophy in economics from Oxford, where his thesis was about competition policy.

A neat plan, it seemed. Something for Forrest. Something for Xenophon, who has some influence with other crossbenchers - important when you have budget measures to get through. It would also be a good gig for Taylor, seen as one of the high flyers of the future.

And the mining executives would be protected from a “show trial” run by the very effective Dastyari.

But then the strategy spectacularly unravelled, before the proposal even got to the full cabinet.

Trade Minister Andrew Robb (the guy in charge of promoting free trade) and Industry Minister Ian Macfarlane (whose portfolio covers resources) publicly made clear their opposition, while avoiding being explicit.

The major miners were appalled. BHP Billiton’s chief executive Andrew Mackenzie declared an inquiry would be ‘'a ridiculous waste of taxpayers’ money".

Don Argus, former chairman of BHP Billiton, told The Australian that if the government intervened in the market Australia would be an international “laughing stock”.

“In a market economy, prices will determine what is produced,” he said, adding it was beyond his comprehension how anyone would think about having an inquiry. “If you don’t understand something, sit down with the miners and talk to them.”

Abbott has insisted the government is committed to the market and dismissed any notion of regulation. The government does not want a witch hunt or demonising, he says.

As things stand, it is unclear whether the inquiry idea is alive or dead. What is clear is that the government has got a pasting and for little purpose.

If (as it is) the Australian Competition and Consumer Commission is satisfied with the behaviour of the major mining companies, which are still selling the iron ore at a profit, and the government says it doesn’t want to regulate, a quick cost-benefit analysis suggests more cost than benefit in an inquiry officially sponsored by the government.

Listen to the latest Politics with Michelle Grattan podcast, with guest, Nick Xenophon, here or on iTunes.

Authors: The Conversation

Read more http://theconversation.com/war-between-miners-catches-government-in-the-crossfire-42066

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