SYDNEY (Reuters) - Fortescue Metals Group (>> Fortescue Metals Group Limited) Chairman Andrew "Twiggy" Forrest on Monday called on Australians to urge the government to stop expansion plans by iron ore miners Rio Tinto (>> Rio Tinto Limited) and BHP Billiton (>> BHP Billiton Limited), saying they were jeopardising the economy.

The plea by the billionaire philanthropist and founder of the world's fourth-biggest iron ore miner was condemned by the national mining lobby, the Minerals Council of Australia, for threatening to set the country on an "interventionist path."

Forrest has accused Rio and BHP of over-producing to drive out competitors from the $60 billion (39 billion pound)-a-year Chinese import market despite Fortescue quadrupling its own production in the last seven years.

"These big companies say they must flood the market next year and the year after and the year after even though it will crash the price further," Forrest said in an editorial in Sydney's Daily Telegraph. "Every time they say this the price falls again."

Iron ore prices <.IO62-CNI=SI> are trading off their lows at $60.50, but still 55-percent under last year's peak

For every $1 price fall, the Australian economy lost A$800 million ($632 million) in foreign income, according to Forrest.

"Write, e-mail or ring your local MP (member of parliament)," Forrest said. "Ask government to consider the multinationals' license to operate in Australia if they don't market Australian iron ore responsibly for all Australians."

Rio has vowed to lift output 16 percent this year. Miners in Australia lease government land and pay royalties of around 7.5 percent of revenue.

    "We take no comfort in what is happening to some of the

smaller, higher-cost iron ore producers that are finding it hard

to compete," Chief Executive Sam Walsh told a May 7 shareholders meeting.

    BHP Chief Executive Andrew Mackenzie last week said it was "incumbent" to maximise output.

"The Forrest view that Australia can effectively set the iron ore price is simply wrong," Brendan Pearson, the Mineral Council's chief executive, said.

"It is important that the federal government maintain its commitment to free and open markets and ensuring that Australia remains open for business," he said.

The federal budget will suffer a A$30 billion revenue write-down over the next four years because of the iron ore slide, Prime Minister Tony Abbott said last month.

Despite a modest recovery this month, "market fundamentals will reassert themselves sooner rather than later," Goldman Sachs analysts Christian Lelong and Amber Cai wrote in a report on Monday, maintaining their average 2015 price forecast of $52 a tonne.

(Editing by Ed Davies)

By James Regan