Australia has been quick to reassure China that its proposed resource tax will not drive up commodity prices for iron and coal imports.
Trade Minister Simon Crean told members of the press in Shanghai that the 40% Resources Super Profits Tax would actually raise supply by replacing flat royalty fees, encouraging smaller projects.
Crean said the recent demand supply conundrum, which put resources in high need, meant prices have increased but the new tax could help ease the situation with more resources on offer, which in turn could help balance the market.
Crean said the proposed tax will result in a 6 to 7% increase in mining investment if it goes ahead.
Since being announced last month, the resources tax proposal has generated widespread criticism among miners including BHP Billiton and Rio Tinto, which have halted some operations and expansion plans while they review their Australian operations.