No case for iron ore review, says Peter Costello

Future Fund chairman Peter Costello has joined the opposition to an inquiry into the iron ore industry.

Future Fund chairman Peter Costello has joined the opposition to an inquiry into the iron ore industry, declaring there is no reason “whatsoever” to believe companies are failing to sell “for the best price imaginable”.

“I’m not convinced there is a case for an iron ore inquiry,” he told the Minerals Council of Australia’s Minerals Week event in Canberra.

The former treasurer’s comments came after BHP Billiton chief executive Andrew Mackenzie had declared earlier that curbing low-cost, profitable iron ore supply would be “a nonsense” and unproductive. “It destroys value, penalises shareholders, customers and employees and disrupts the power of open markets,” Mr Mackenzie said.

Calls for the inquiry, champ­ioned by Fortescue Metals Group’s chairman Andrew Forrest, followed claims big miners were pushing down prices to force out smaller rivals. The federal government last month ruled it out.

Asked about comments by Fin­ancial System Inquiry chairman and former Commonwealth Bank boss David Murray that an inquiry was not needed, Mr Costello said companies should produce their product and “sell it on a free market for the best price imaginable”.

“I have no reason to believe that the companies that are competing in the market aren’t doing that,” he said. “You can always say, what’s the harm in any inquiry. But, in my view, you’ve got to identify a problem before you have an inquiry.”

Mr Costello also told executives at the conference that labour-market reform should be on the agenda and that “I think we will have to rediscover how to make ourselves more competit­ive”.

Former Productivity Commission chairman Gary Banks, who is now dean of the Australian and New Zealand School of Government, said the tax and workplace relations reviews “could be said to be currently labouring under some burdens”.

He said the workplace relations review — which the government has asked the Productivity Commission to do — was “too long coming, leaving too little time to conduct it”.

“And while the terms of reference were appropriately broad, key issues raised by the commission in its early issues papers were pre-emptively dismissed.”

He said the tax white paper was being done in the “shadow of the ill-fated Henry review”.

“Its main rationale in that sense is to remedy the deficiency of that earlier review in relation to the GST, given the urgent need to reduce reliance on income taxes … But, again, the political signals eman­ating around that review are not helping from the government or from the opposition.”

Professor Banks cited the debate about the GST on women’s sanitary products. “With the tampon question … I saw that as a missed opportunity to restate the case for a GST of broad coverage.”

He warned that Australia was plagued by a lack of proper cost-benefit analysis on infra­structure, particularly at the state level and for transport. “There has been some unpreced­ented reversals in major projects following changes of governme­nt which have had an impact on perceptions of sovereign risk, who would have thought it of Australia, and in turn will lead to price premiums, prices that will in the end be paid by the community,” Professor Banks said.