Australia PM downplays US debt downgrade fears

SYDNEY: Australian Prime Minister Julia Gillard sought to calm public nerves over global debt woes Saturday after Standard & Poor's cut the United States' credit rating for the first time in history.

Gillard told Australians their economy was well placed to weather financial crises looming in the US and Europe and would not be heavily affected by S&P's decision to downgrade the US rating from AAA to AA+.

"People should look with confidence at our economic credentials and fundamentals, and people should look with confidence at the ability of this government to deal with global instability," Gillard said.

"We came out of the global financial crisis without having gone into recession."

Australian stocks plunged 4.00 percent on Friday after steep falls on world markets linked to growing debt woes in Italy and Spain and fears about the US economy, with more than seven percent wiped off the market across the week.

Friday's losses were the worst seen in a single session since the height of the 2008 financial crisis.

Mining-driven Australia was the only advanced economy to avoid recession during the downturn, due to resilient Asian demand for commodities and Gillard said booming China would again shield it from the worst.

"When we look at our own economy, I think people understand now that a quarter of our exports go to China with its huge demand for our resources," the prime minister said.

Australia's balance of trade figures were at 140-year highs due to Asia's rapid industrialisation, she added, noting that Australia had low levels of debt and was at near-full employment, with a jobless rate of 4.9 percent.

Copyright AFP (Agence France-Presse), 2011