Early budget surplus possible: Westpac

Strong jobs growth means federal budget could return to surplus earlier than forecast, Westpac says.

THE unexpected strength of the labour market opens the prospect for the Federal Government bringing the budget back to surplus earlier than forecast, an economist at one of the nation's major banks says.

Treasurer Wayne Swan and Finance Minister Lindsay Tanner have already dismissed research by one investment bank that suggests the budget could be back in surplus in 2011-12 rather than 2015-16.

Mr Swan has said that sort of speculation is "pie in the sky".

Westpac senior economist Anthony Thompson, in releasing a new business survey on Thursday, was asked whether the federal budget could be brought back to surplus early.

"That is a prospect," he told reporters in Canberra, adding that faster than expected labour market improvement was a factor.

The unexpected drop in the jobless rate reduced unemployment benefit payouts and lessened the need for employment supporting programs, he said.

"To that extent, it has to be a net positive."

The Australian Chamber of Commerce and Industry says the government should continue with its stimulus measures in the short term.

"We don't think it would be a good idea to terminate the stimulus," director of economics and industry policy Greg Evans told reporters in Canberra.

In the medium to longer term the government needed to get the budget back to balance, with particular emphasis on the spending side, he said.

"There should be a root-and-branch review of spending as well to get the budget back to balance."

Mr Evans wants more detail on how the government's pledged two per cent cap on spending will operate.