Australia’s Scrapped Iron-Ore Inquiry Fires Up Debate Over Output – by Rhiannon Hoyle (Wall Street Journal – May 24, 2015)

http://www.wsj.com/

Questions loom over who should control Australia’s natural resources: the nation, or the private companies that own and operate them

SYDNEY—The Australian government’s decision to reject an inquiry into the iron-ore market capped a tumultuous week during which a bitter debate over the industry’s relentless output expansion, despite sinking prices, has dominated the national discourse.

At the heart of the issue: whether a country’s natural resources belong to the nation, or the private companies that own and operate them.

Australia’s Prime Minister Tony Abbott earlier this month backed calls for the parliament’s economics committee to investigate claims that mining giants BHP Billiton Ltd. and Rio Tinto PLC have been driving down iron-ore prices by boosting production in a way that undermines their smaller competitors, as well as harming the country’s economy.

But in a sign of the rift within government itself over the issue, Australia’s Treasurer Joe Hockey late Thursday officially nixed any plans for an inquiry.

His decision followed an unusually outspoken campaign by the normally publicity-shy mining majors, with BHP’s Chief Executive Andrew Mackenzie saying any probe would be “a ridiculous waste of taxpayers’ money.”

“We were attracted to an inquiry, no doubt about that,” Mr. Abbott told reporters Friday. “But we talked to the various people in the sector and came to the conclusion…that a parliamentary inquiry was going to generate more heat than light.”

Governments of resource-rich countries around the world have often sought ways to get a better deal from their mineral wealth, often by raising taxes on profitable mining companies or by taking equity stakes in projects.

Australia’s last government was embroiled in a major debate earlier this decade over a planned new resources tax aimed at propping up the country’s budget when commodities prices were riding high.

The latest debate is taking place as concerns grow over Australia’s economic prospects now that slowing growth in China seems to have ended the long commodities boom, which helped the country avoid recession for a quarter of a century.

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