Prime Minister Julia Gillard says Australia will not compete on wage rates compared to Africa but we have other advantages and mining investment is strong.
Her comments came after Australia's richest woman, Gina Rinehart, urged Australia to become more competitive, warning Africa is a cheaper investment option with workers willing to take jobs for less than $2 per day.
"We are not going to have wage rates the same as the wage rates in Africa," Ms Gillard told ABC radio on Wednesday.
"We mine differently than in other countries."
Ms Rinehart says in a video presentation there is unarguable evidence Australia is becoming too expensive for multinational companies.
"What was too readily argued as the self-interested complaints of a greedy few is now becoming accepted as the truth, and more ominously is showing up in incontrovertible data," she said in a video on the Sydney Mining Club website.
Overseas competitors, such as Africa, can offer much cheaper investment opportunities, she said.
Ms Rinehart called for action on making Australia more competitive, blaming mining and carbon taxes, red tape and high wages for the economy's "sluggish" performance.
Ms Gillard said Ms Rinehart was a "well-known opponent" of the mining and carbon taxes but the prime minister disagreed on both points.
She said Australia would continue to have strong investment in mining projects.
"We've seen billions of dollars of new projects announced by the mining industry since they knew that there was going to be a minerals resource rent tax and since they knew that there was going to be carbon pricing," she said.
"We're going to compete on our great mineral deposits, our application of technology and high skills to the task."
Ms Gillard acknowledged some companies had paused or delayed plans - such as Fortescue, which announced on Tuesday it would shelve $1.57 billion of expansion plans and cut hundreds of jobs.
"But the mining sector, the resources sector is far bigger than any one company," she said.
Asked about Ms Rinehart's suggestions, Mr Abbott said she was perfectly entitled to put forward her ideas.
"But it's not something that the coalition has considered, and it's not something that the coalition's planning for," he told reporters in Bendigo, Victoria.
Meanwhile, Australian Greens leader Christine Milne accused Ms Rinehart of being greedy.
"Gina Rinehart really is the epitome of the greed and the abuse of the environment that has become such a characteristic of the mining industry in Australia," she told reporters in Hobart.
"Look what you're getting - a wealthy woman who tells other people that they should drink less, smoke less, work harder, get paid less, failing to recall of course that her father left her millions to start with."
Senator Milne said Ms Rinehart's ideas were an absolute disgrace.
"It is as if she thinks the whole country is there to be dug up, smashed and shipped away at slave labour rates," she added.