By Gemma Daley (China Daily)
Updated: 2007-09-20 07:26

Australia's economy is strong enough to weather the financial crisis sparked by the US housing slump, Treasurer Peter Costello said.

The Federal Reserve cut its benchmark interest rate to 4.75 percent in a bid to protect the US from sinking into a recession sparked by fallout from the country's worst housing slump in 16 years.

"We welcome the Federal Reserve's rate cut," Costello said. "The US is cutting rates because their economy is weak. Australia's economy is strong."

The Australian economy expanded 0.9 percent in the three months ended June 30, compared with the previous quarter, the fastest pace in three years. The economy is in its 16th year of expansion and the government has delivered 10 budgets in surplus since it won power in 1996.

"We are not immune from international developments," Costello said. "Our banking sector is highly profitable, our economy is strong and our budget is in much better condition than America."

The Australian dollar rose 2 percent yesterday, the most in almost a month, after the US rate decision, which boosted the appeal of the nation's higher-yielding assets. Australia's benchmark stock index, the S&P/ASX 200 Index, rose 2.1 percent as of 11 am in Sydney.

"There are some storm clouds gathering internationally," Prime Minister John Howard told reporters yesterday.

Bloomberg News

(China Daily 09/20/2007 page16)