SYDNEY—The Australian government said Thursday it will not seek to hold a special parliamentary inquiry into recent activity in the iron-ore market.

"After discussing the issue with regulatory bodies and stakeholders across the resources sector, the Government will not be initiating an inquiry at this time," Treasurer Joe Hockey said in a statement.

The decision represents a turnaround for the conservative government after Prime Minister Tony Abbott l ast week backed a special inquiry, saying it was important to discover the facts underpinning sharp falls in prices for the country's chief export.

Independent Senator Nick Xenophon has been calling for parliament's economics committee to investigate claims that mining giants BHP Billiton and Rio Tinto are driving down prices by boosting supply to undermine smaller competitors.

BHP declined to comment. Spokesmen for Rio Tinto and Fortescue couldn't immediately be reached.

Earlier this week, BHP chief executive Andrew Mackenzie cautioned a parliamentary review would send "a terrible signal" to iron-ore buyers in countries including China and Japan, and could encourage them to invest more in other resource-rich countries such as Brazil to diversify their sources of supply.

The Minerals Council of Australia, a lobby group for the mining industry, also said last week it welcomed a parliamentary inquiry to help expose the idea that higher Australian production was chiefly responsible for the dramatic price falls on the global market.

The iron ore price has collapsed to decade lows in the past year as swelling supply from mines in Australia's Pilbara region has met cooling demand from China's steelmakers.

Some smaller Australian producers have been among the most vocal critics of their larger rivals' strategies. Companies like Fortescue Metals, controlled by billionaire Andrew Forest, are more vulnerable to lower prices because they lack the scale to keep down production costs.

The price falls have become so pronounced that they are eating into tax revenue, making it harder for the government to improve the nation's finances as promised at the last election, while producers with high cost bases are now threatened.

Opposition leader Bill Shorten said the uncertainty around an inquiry had damaged investor confidence in Australia.

"There is no doubt the Prime Minister's actions and those of his Ministers have damaged the industry. This has been a debacle entirely of the Government's own making," Mr. Shorten said in a statement.

Write to James Glynn at james.glynn@wsj.com

Access Investor Kit for BHP Billiton Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0000566504

Access Investor Kit for BHP Billiton Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US05545E2090

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

BHP (ASX:BHP)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more BHP Charts.
BHP (ASX:BHP)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more BHP Charts.