WA Premier Colin Barnett has called for calm in the debate over iron ore production after the Federal Government abandoned support for an inquiry into the market power of BHP Billiton and Rio Tinto.

FMG chairman Andrew Forrest was pushing for the inquiry, accusing the big miners of driving down prices to push small miners out of business.

Mr Barnett never supported the idea, arguing an inquiry would achieve little and potentially compromise relations with China, the state's largest trading partner.

He said the big miners should now ratchet down their public statements.

"I've spoken to both the major producers here, at the most senior levels, and I have suggested that they change their rhetoric," he said.

"Stop talking about expansions, and let the industry come back into some sort of balance."

Mr Barnett shared the concerns of small and medium miners about iron ore production levels and falling prices, but said talk of an inquiry was unhelpful.

He said an inquiry would have been ineffective.

"All the inquiry could do is come up with some kind of recommendation to try to control exports of iron ore," he said.

"I don't support that, but that's about the only thing they could come up with."

The Federal Government has now shelved the idea but Mr Forrest has pledged to continue fighting for greater scrutiny of the big miners.

Time to rebuild China relationship

Mr Barnett said it was time to refocus on the trading relationship with China.

"He's [Forrest] made the case, that's fine, he's entitled to do that, but I just think we need to settle down," he said.

"We've got a bit of work to do with our major customers.

"I think Australia and the industry have made some mistakes over the past decade. You can understand, therefore, why China is looking towards South America."

To strengthen his point, Mr Barnett said 30 per cent of global iron ore production came from Western Australia, and that iron ore was owned by the West Australian government, on behalf of the people of WA.

He said he continued to believe the strategy of BHP, Rio Tinto and the Brazilian miner Vale to flood the market was flawed.

"To be supplying an increased amount of iron ore, boasting about the low cost of production and expansion plans, when the market is weak, is a bad business policy," Mr Barnett said.