If the deal announced this morning is far removed from where the government started when it announced its new resource tax, the big test of Julia Gillard's political skills will be whether it is seen as a ''compromise'' or a ''backflip''.

Backflips, it will be remembered, helped bring Kevin Rudd down. ''Compromises'', if that is how changes of policy are interpreted, can make Gillard seem responsive and politically savvy.

The central test of how far the retreat goes will be its effect on bottom line. If it cuts substantially into the proposed $12 billion revenue over the budget period, the government will need a credible explanation on how this will not damage the fiscal position.

The most obvious solution is to cut back the measures the mining tax was to finance, and the suggestion is that is what the government proposes. If so, that will disappoint those who would have benefited from them.

Another test will be the reaction of the big miners. If they are relatively satisfied, the government will have moved a long way.

The deal builds on that hammered out in the final days of Kevin Rudd. But Rudd would have paid a high political price for concessions. Gillard is in her honeymoon phase. Some voters will be critical of what's done for the miners, but others will give Gillard marks for solving the problem.

In the Labor Party, the strategists are likely to think a retreat is worth it to get this issue off the front pages and neutralise it in some mining-sensitive seats.

And if the new PM can manage to convince people that a backflip is actually just a case of being reasonable, the Labor Party will think she's worth her weight in gold.

Source: The Age