Tony Abbott says the competition watchdog is best placed to deal with any problems in the iron ore market.

The government has decided not to go ahead with a parliamentary inquiry into the industry, despite last week expressing support for the idea.

Independent senator Nick Xenophon, who supported calls from smaller players in the industry for an inquiry, is now weighing up whether to seek Senate support for an investigation or bring on his own legislation.

There are fears BHP Billiton and Rio Tinto are manipulating the market to drive out smaller players – a claim the multinational companies deny.

Abbott said after talking to stakeholders he had concluded an inquiry would do more harm than good.

“The last thing we want to see is any predatory behaviour in any market, particularly a market that’s as important for our country and for our long-term future as the iron ore market,” he told reporters in Ulverstone.

“But we do have the ACCC (Australian Competition and Consumer Commission) which is very good at policing that kind of misbehaviour.”

The prime minister admitted he was initially attracted to an inquiry but decided it would “generate more heat than light”.

Opposition Leader Bill Shorten said while the government was considering the inquiry it had taken its eye off the 43,000 people who had lost their mining sector jobs.

“We’ve seen the government carry on for a week about a phantom iron ore inquiry, jeopardising the position and reputation of Australian iron ore companies,” he told reporters in Melbourne.

“But nowhere in this last week have I seen Tony Abbott or Joe Hockey talk about the jobs of the actual miners who have lost their jobs.”

Treasurer Joe Hockey told reporters in Brisbane the previous Labor government had damaged the industry with the mining tax.

“There have been many moving parts and there will continue to be many moving parts in the iron ore story,” he said.

This involved movement offshore, he said.

– AAP