CANBERRA (Reuters) – Australia left open the possibility of watering down its proposed 40 percent mining tax yesterday, as fund managers asked mining companies to tone down their rhetoric, saying it had hurt shares held by workers and pension funds.

Treasurer Wayne Swan has said he would not rule in or out any changes to the tax on mining "super profits" ahead of interim report on talks with miners being handed to him on Friday.

"The 40 percent is the framework we've put out since day one and that's the framework in which we're consulting," Swan told local radio after opposition lawmakers and newspaper reports said there would be changes to the way the tax was calculated.

His comments follow reports Canberra was prepared to change the way the tax is calculated in order to pacify miners.

The profits tax is the centrepiece of Prime Minister Kevin Rudd's campaign for re-election at polls expected around October. It underpins his vow to return the budget to surplus by 2012-13, to cut the company tax rate and to indirectly fund another pledge to boost retirement incomes.

Uncertainty over the government's stance on the tax has unsettled financial markets, and the Australian dollar dipped briefly after the government appeared to initially play down reports indicating it was prepared to change the tax.

The government currently defines a windfall profit as anything that exceeds a return on assets of about 5.3 percent, the equivalent of the ten-year bond yield. That could be more than doubled to 12 percent, press reports in The Australian and Sydney Morning Herald newspapers said.

The speculation, published on newspaper web sites overnight, sent UK-listed shares of Rio Tinto, BHP Billiton and Xstrata surging. In Thursday trading in Sydney, BHP Billiton shares rose 4.2 percent while Rio Tinto rose 4.8 percent, outstripping a 1.7 percent rise in the wider market. Australia's powerful $1 trillion pension fund industry urged miners to cool their multi-million-dollar campaign against the tax, warning it was hurting mining and energy shares indirectly held by most workers.

"What we're having on almost every morning now and every day are increasingly hyperbolic statements being made by the Minerals Council and the mining sector itself about the potential effects of the tax," Industry Super Network chief executive David Whiteley told Australian radio.

Whiteley said the average balanced pension fund had lost more than 4 percent of its value over the past month amid the furore over the mining tax and Europe's sovereign debt crisis.

Speculation appeared to growing in Canberra that the government was prepared to soften the tax, with some opposition and minor party lawmakers pressing government and treasury officials over whether changes were in the works.

The proposed tax, due to come into effect in mid 2012, has angered the mining industry, which accounts for roughly half of all Australian exports.

But the changes envisaged in newspaper reports may not be enough to mollify miners.

"Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia," Xstrata Chief Executive Mick Davis said in an e-mail to Reuters, denying Canberra was seriously consulting miners.