Treasurer Wayne Swan.

Treasurer Wayne Swan says questions about a future budget surplus are hypothetical. Photo: Andrew Meares

Peak business groups have stepped up their call for the government to abandon its surplus promise rather than damage the economy with more cuts as Treasurer Wayne Swan says questions about the surplus are hypothetical.

The Business Council of Australia and the Australian Industry Group said yesterday that while a surplus was desirable, it should not come at the expense of more cuts that would hurt growth, dampen productivity and reduce tax revenue.

The chief executive officer of the council, Jennifer Westacott, said her membership, which includes the nations biggest corporations, believed the forecasts in last week's mid-year update were too optimistic and the surplus was unlikely.

"Our members are telling us that the economy could well be softer than Treasury has projected, and in these circumstances it would be reasonable to revisit the need to return to surplus in 2012-13," she said.

"We supported the goal of achieving a surplus in 2012-13 but we have always said that this should be able to be revisited if economic conditions deteriorated."

The chief executive of the Australian Industry Group, Innes Willox said the extent of spending cuts and savings currently under way was "already very substantial and we must now be getting close to the point where it could be self-defeating and fiscal policy could excessively slow the economy and, ironically, impede the recovery of tax revenues."

Last week's mid-year budget update contained $16.4 billion in cuts and savings and forecast a threadbare $1.1 billion surplus for this financial year.

The document left open the possibility of a deficit, saying should economic conditions or tax receipts decline further, the government would have to weigh the impact on growth and the vulnerable before cutting further.

Since then, the government has pointedly declined to repeat its surplus promise, instead using such language as "determination" and "plan".

In Parliament yesterday, the shadow treasurer, Joe Hockey, pushed Mr Swan who had previously promised to return the budget to surplus in 2012-13, "come hell or high water".

Yesterday, Mr Swan fended off the questions as "hypothetical".

"What if something happens in the global economy?" he asked.

Mr Swan said repeatedly the government would "always do the right thing by growth and jobs in our economy" — words that accommodate a deficit if that is more beneficial than further cuts and savings.

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