BHP chief comes out swinging against Australian iron ore inquiry

(Adds Abbott comment)

By Matt Siegel

SYDNEY, May 19 (Reuters) - 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 CEO Andrew Mackenzie said on Tuesday.

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 (Xetra: 855018 - news) 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 ($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 $48 a tonne over the next year.

Major miners BHP, Rio Tinto, Brazil's Vale and Fortescue 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 $46.70 a tonne in April, its lowest in a decade, although it picked up to around $61 last week.

Just hours after Mackenzie's interview Abbott appeared to backtrack at least somewhat from his earlier support of last week, telling reporters that he had not made any decision to have an inquiry.

"The last thing we would want is a one-sided inquiry which degenerates into a witch hunt against some of our best companies," he said.

Xenophon's call for a probe coincided with the opening of a new front in a campaign by billionaire Andrew "Twiggy" Forrest, founder of Fortescue Metals Group, Australia's no.3 iron ore producer, against bigger rivals Rio Tinto and BHP.

Fortescue has created a website called Our Iron Ore (http://www.ourironore.com), looking to drum up support for his war on Rio and BHP. Forrest says the pair's expansion plans are jeopardizing the Australian economy.

($1 = 1.2519 Australian dollars) (Reporting by Matt Siegel; Editing by Richard Pullin)