Fiscal cliff agreement not enough: Swan

Treasurer Wayne Swan says the last-minute deal to end the "fiscal cliff" doesn't go far enough. Source: AAP

AUSTRALIAN Treasurer Wayne Swan says the last-minute passage by the US Congress of a deal to avert the "fiscal cliff" of tax hikes and massive spending cuts is welcome, but doesn't go far enough.

The deal - passed by Congress an hour before midnight on New Year's Day US time (Wednesday AEDT) - increases taxes on the rich and puts off $US109 billion ($A105 billion) budget cuts for two months, lifting the clouds of immediate crisis.

Had the deal failed, the combined $US500 billion shock of tax hikes and spending cuts could have rocked the fragile recovery - and the global economy.

Mr Swan has been warning for days that if the US Congress failed to pass a bill to comprehensively deal with the issue, the Australian economy could be hurt despite its relative soundness.

He says the last-minute deal is not enough.

"While it is welcome to see progress towards a deal in the US with passage through Senate and the House, more will need to be done to achieve the enduring deal the world needs," Mr Swan said in a statement on Wednesday.

"It is absolutely critical that the outcomes reached through this process are comprehensive in their nature.

"As the IMF have said, anything short of a deep and wide reaching resolution will not be good enough this time around."

Mr Swan said the Gillard government would monitor the situation because it has "a significant impact on the entire global economy, including Australia and our region".

Mr Swan has previously said the US budget drama, combined with Europe's economic woes, was having a "real impact" on the global economy.

Down the line this had hurt Australia's revenue base, a key factor which led the government to announce just before Christmas that it was unlikely to deliver on its promised budget surplus.

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