A proposed Australian Senate inquiry into the economic impact of a slump in the price of iron ore could damage the country’s economy and drive Asian customers to shift investment to Brazil, BHP Billiton Ltd CEO Andrew Mackenzie said yesterday.
Australian Prime Minister Tony Abbott last week threw his support behind a proposal by Senator Nick Xenophon for an inquiry into the impact of the price collapse on government revenue and to consider whether action is needed to ensure healthy competition in the sector.
In a heated radio interview Mackenzie hit back, blasting an inquiry as a waste of government resources and adding that he was “perplexed” by the conservative government’s decision to back it.
Mackenzie denied that top producers Rio Tinto PLC and BHP had colluded to depress prices and drive smaller producers out of the market, calling the inquiry “an amazing gift to our major competitor, Brazil.”
“Not all inquiries are bad, because they can draw people on to the same page, create transparency and trust, but this is a ridiculous waste of taxpayers’ money,” Mackenzie said. “This is red tape and a burden on business, plain and simple.”
The iron ore price slump has caused a A$20 billion (US$16 billion) loss in government revenue in the past year and the fiscal 2016 budget released last week hinges on iron ore fetching at least US$48 per tonne over the next year.
BHP, Rio Tinto, Brazil’s Vale SA and Fortescue Metals Group Ltd have ramped up output as demand growth has cooled in China, which has driven down prices and left smaller high-cost producers struggling to survive.
The iron ore price hit US$46.70 per tonne last month, its lowest in a decade, although it picked up to about US$61 last week.
Just hours after Mackenzie’s interview, Abbott appeared to backtrack at least somewhat from his earlier support, telling reporters that he had not made any decision to have an inquiry.
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