The Minerals Council of Australia has rejected the requirement for a new iron ore tax following a plunge in the mining sector’s capital expenditure (capex).

Figures released by the Australian Bureau of Statistics (ABS) have highlighted a 16% fall in capex this June quarter in the mining sector on a seasonally adjusted basis.

Since the December 2010 quarter, the A$10.7bn ($8.06bn) expenditure is the lowest, the council said.

"Massive new taxes on Western Australia’s most important industry will reduce jobs, not create them."

Minerals Council of Australia chief executive Brendan Pearson said in a statement: “Today's official capital expenditure data underline the folly of the WA Nationals’ proposal for a new A$7.2bn ($5.4bn) tax on Australia's major iron ore producers.

“Western Australian (WA) Nationals Leader Brendan Grylls’ proposal for a new A$7.2bn ($5.4bn) iron ore tax would make Western Australia the highest taxing iron ore province in the world.

“Massive new taxes on Western Australia’s most important industry will reduce jobs, not create them.”

According to Pearson, the new tax would be a burden and will deter investment instead of encouraging it.

If it is implemented, the iron ore tax is expected to hurt households in the cities, as well as the regions of WA in addition to small businesses across the state. It will also freeze investment in the state.

Mining majors BHP Billiton and Rio Tinto already contributed A$3.2bn ($2.4bn) in royalties to the WA Government in 2014-15, and a further A$259m ($195m) in other state government taxes.

Iron ore royalties to the government have doubled since 2009-10 from A$1.5bn ($1.1bn) to about A$3.6bn ($2.7bn) in 2015-16.

In the five years up to 2015-16, these companies purchased around A$80bn ($60.28bn) worth of goods and services from local WA businesses and also invested about A$2.7bn ($2bn) in infrastructure and services for local towns and communities.