Treasurer Joe Hockey has confirmed the government will not initiate an inquiry into the iron ore industry “at this time”, after discussions with regulatory bodies on Thursday.

The Federal Cabinet was this week divided on whether an inquiry should go ahead, which would put the big mining players under the microscope.

This week Fortescue Metals Group chairman Andrew Forrest was leading the charge for an inquiry, claiming two large miners – BHP Billiton and Rio Tinto – were flooding the market with ore, to cut the price and drive smaller miners out of business.

• Iron ore stand-off becomes debate about capitalism
• Cormann disowns support for iron ore inquiry
• Government divided over iron ore price inquiry

Mr Hockey said there had been speculation over recent days about whether a parliamentary inquiry into the sector was “necessary”.

“After discussing the issue with regulatory bodies and stakeholders across the resources sector, the government will not be initiating an inquiry at this time,” he said in a statement on Thursday.

Prime Minister Tony Abbott said last Friday an inquiry was needed, before publicly retreating from his claim.

Meanwhile, Finance Minister Mathias Cormann was criticised on Wednesday for doing the same.

Nick Xenophon said the issue would continue to dog the government. Photo: AAP

The cause was then taken up by Independent Senator Nick Xenophon, who had been negotiating with Mr Hockey for a joint House-Senate select committee inquiry, led by a Liberal MP.

Mr Xenophon said on Thursday night he was considering his options and believed the issue would continue to dog the government.

“This is a case of shock and ore,” he said.

“This raises the issue of sovereignty. The fact is neither major party was prepared to support it.”

Mr Xenophon said Australia could not have its head in the sand over the issue, and there were too many big questions to be asked in the national interest.

The Australian economy is being fundamentally realigned as a result of the drop in iron ore prices, and it seems foolish and short-sighted to not inquire into that, he said.

He also said there was a need to look into the allegations made by mining magnate Mr Forrest.

Opposition Leader Bill Shorten said the damage had already been done to the industry and Mr Abbott had to take responsibility.

Mining union boss Dave Noonan also criticised Mr Abbott’s retreat, which followed an outcry from the biggest iron ore players – BHP Billiton and Rio Tinto.

“When the duopoly reared its ugly head, he bravely turned his tail and fled,” Mr Noonan tweeted.

The Minerals Council of Australia welcomed the government not proceeding with an inquiry.

“This is a good decision that will enable Australia’s iron ore sector to focus on the task of further strengthening its competitiveness in a fiercely contested global market,” CEO Brendan Pearson said in a statement.

Mr Forrest said the Australian people had a right to understand the circumstances that led to the collapse of the iron ore price, the loss of thousands of jobs and shutdown of companies.

“Like free markets, transparency is good for business. So why work against the transparency a formal inquiry would bring?” he said in a statement on Thursday.

“Those that paint me as an interventionist know the iron ore industry is an oligopoly in which each of the big players wield more market power than Saudi Arabia in oil.”

– with AAP