* Sees inflation peaking at 6.5-7 pct in Dec
* Sees measures passed in Parliament in weeks, months
* Employer tax cut could halt job losses immediately
By Balazs Koranyi and Sandor Peto
BUDAPEST, April 20 (Reuters) - Hungary's new government will concentrate on saving jobs and its often painful measures are aimed at keeping the budget on track while lowering taxes on work, Finance Minister Peter Oszko said on Monday.
Oszko said rising taxes on consumption will widen the country's recession and temporarily boost inflation but such a hike will allow the government to lower taxes on labour and that could have an immediate effect in slowing job losses.
"Current market conditions dictate that we should focus on maintaining jobs and allocate resources for this," Oszko told Reuters in an interview. "The goal is stopping the fall in employment and reducing the tax burden has an immediate impact."
"A decline in costs can rein in the a decline in employment immediately. That can exert its impact just as quickly as the VAT hike does," Oszko said in his first interview since taking office last week.
Analysts said Hungary's 9.1 percent jobless rate could peak above 10 percent later this year.
The country, one of the hardest hit nations in the global economic crisis, has been struggling to rein in its budget deficit while keeping the budget on track and reducing its especially high tax burden on corporations.
Gordon Bajnai, who took over as prime minister last week, announced on Sunday that the government would raise the value added tax rate to 25 percent from 20 percent effective July 1 while reducing corporation's payroll taxes.
"That means that for people earning the minimum wage, employer costs will fall in excess of 7 percent, almost 8 percent and for people earning the average wage, it'll decline by 6 percent," Oszko said.
But Oszko said the VAT rise would push inflation to a peak of 6.5-7 percent in December and mean an average annual inflation of 4.5 percent for the year, above the ministry's previous forecast for 3.7-3.9 percent.
The country became the first European Union (EU) nation last year to seek IMF help, and kept its economy afloat with a $25.1 billion package funded by the IMF, the EU and the World Bank.
Hungary expects its economy to shrink by up to 6 percent this year as its export-driven economy suffers on Europe's waning demand and its domestic consumption implodes on rising unemployment and higher consumption taxes.
Oszko said the budget contained some reserves, on the magnitude of 80 billion forints, in case the environment deteriorates further.
Bajnai announced spending cuts worth 400 billion forints for 2009 and 900 billion forints for 2010 through cuts in pension, wages and social spending.
The cuts will keep the deficit under 3 percent of GDP in 2009, in line with the IMF's conditions and will help put the primary surplus, or the surplus before debt service costs, above 4 percent of GDP by 2010.
Some analysts have been worried that the government's low popularity could hamper its effort to pass the needed legislation but Oszko said he saw solid consensus behind the measures and expected the necessary laws to be passed in weeks or months at the latest but before the autumn.
(Reporting by Balazs Koranyi; Editing by Victoria Main)