Former federal treasurer Peter Costello says a decision by Woodside Petroleum to shelve a $A45 billion gas project in the Kimberly shows Australia needs to do more to improve its international competitiveness.
Mr Costello said the Government should be encouraging the use of foreign worker visas, not trying to make it harder.
Woodside on Friday said escalating costs had made the project unviable.
BHP Billiton last year decided to abandon the expansion of its Olympic Dam mine in South Australia last year.
Mr Costello said that while there are some cost pressures the government cannot control, there are other things it could do - including greater workplace flexibility and helping businesses get skilled labour.
The ABC reports the government is cracking down on the use of 457 visas to bring foreign workers into Australia, arguing that some employers are abusing them.
"I actually think 457 visas are very important for the mining industry in particular. I wouldn't be making that harder," Mr Costello said.
"I'd be enabling those resource companies that need skilled foreign labour to find it through that immigration policy.
"I would be encouraging the use of 457 visas where they can bring in skilled labour, and we've even seen unions using 457 visas to bring in labour."
Woodside chief executive Peter Coleman said the company will investigate other ways to process the gas, including through the use of floating LNG technology or building a pipeline to Karratha.