The federal government was right to stay away from any form of intervention in the iron ore market, according to David Murray, the former chief executive of Commonwealth Bank who ¬recently chaired the Financial ¬System Inquiry.

“It’s not clear to me where the market failure would have been to justify intervention,’’ he said of the proposal, since spiked, to hold an inquiry into iron ore export prices and volumes.

“Intervention can usually be justified where markets become monopolised,” he said, adding that clearly there was no monopoly producer in this case.

“A monopoly producer does not increase production when prices are low. A monopoly producer holds production.

“So if people are increasing production because they can still make a margin or return, that is not indicative of market failure.

“Therefore the case for intervention seems to be absent.”

Robert Parker, London-based global head of institutional marketing and vice-chairman at Credit Suisse Asset Management, said he was not familiar with the issue but noted that most attempts throughout history by governments to intervene in commodity prices “have almost always ended in disaster’’.

In a roundtable discussion with The Australian, Mr Murray made it clear he understood exact¬ly why Australian investors were chasing yield stocks, although they might have to weather a price downturn.

“When you look at the decisions people are making, they’re entirely rational given the monetary policy settings we have.

“So the issue is whether they have, depending upon their investment circumstances, the capacity to remain patient enough to see through any adjustments in the equity market.

“If they have, and they take yield out of solid consumer ¬staple-type companies or other solid companies in the market, they take good dividends from those, then those decisions are entirely rational.’’

He noted that the lack of a deep corporate bond market in Australia meant that “the decisions around holding fixed-interest securities are somewhat skewed” and that pension funds in particular were finding it hard to hold government bonds.

Looking to the near future, Mr Murray expressed concern that Australia might replace productive mining investment with less productive assets.

“Will we have converted into new productive investment with policies that drive higher productivity, or will we have participated in asset momentum in housing and equities without highly productive new investment? Now, being capital dependent on the rest of the world, it’s important that we’re more careful with investment and that we make it as productive as possible.

“So I see an issue with housing because there’s so much momentum there.”

Mr Murray agreed with Mr Parker that Sydney real estate was a special case because it was becoming a global city and a refuge for global capital.