UPDATE 1-Brazil's Rousseff: Will not pursue fiscal tightening

* Rousseff says Brazil does not need fiscal tightening

* Comments come as public accounts deteriorate

(Updates with more Rousseff comment)

SAO PAULO, Aug 30 (Reuters) - Brazil's presidential front-runner, Dilma Rousseff, said on Monday she will not tighten fiscal policy, in her strongest comments to date on how she would sort out public accounts if elected.

"I will not implement fiscal adjustment under any circumstance for one reason: Brazil does not need it," Rousseff told reporters in Sao Paulo.

Rousseff has sought in recent days to downplay speculation that she might resort to austerity measures if elected president, saying last week she would favor fiscal discipline but ruling out drastic budget cuts.

In a recent interview with Reuters, Workers' Party President Jose Eduardo Dutra raised the issue of possible spending cuts. He said a Rousseff administration would tighten its belt if necessary to ensure ambitious budget targets and drew a parallel to austerity measures President Luiz Inacio Lula da Silva adopted during his first year in office in 2003. [ID:nN20143295]

Rousseff did say however spending would be controlled and that she expected an expanding economy to continue to boost tax revenues. Brazil's economy is expected to have slowed in the second quarter of the year, but analysts in a weekly central bank survey still see it closing 2010 at 7.09 percent.

"Tax collection will rise, the country will continue to grow," Rousseff said.

Investors are looking for hints regarding Rousseff's budget-cutting credentials as public accounts in Brazil continue to deteriorate and opinion polls point to a Rousseff win in the first round in the October elections.

Some expect Rousseff to be less disciplined than opposition candidate Jose Serra on the fiscal front if she takes office, having in the past defended an increase in the size of Lula's government to execute ambitious social programs and investments.

The comments come as data last week showed the country's primary budget surplus at 2.03 percent in the 12 months through July -- way off the end-of year target of 3.3 percent. For more, see [ID:nN26189174].

Investors use the primary budget surplus as a gauge of a country's ability to service its debt. (Reporting by Carmen Munari; Writing by Ana Nicolaci da Costa; Editing by Dan Grebler and Diane Craft)