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America's Congress will sit on Sunday for an emergency session on the country's financial crisis.

They have until New Year's Day to strike a deal with the President on his federal budget.

If the President and Republican leaders don't agree on a deficit reduction plan, automatic tax rises and spending cuts worth 650 billion dollars will take effect on 1st January 2013.

An American earning $43,000 a year would face a tax hike of more than $3,000 and two million Americans would lose their unemployment benefits.

The worry for Australia is that America's financial problems could be contagious.

Some observers say not to fear because our economy is strong.

ANZ strategist Andrew Salter is not concerned, saying “The Australian equity market itself has largely shrugged off these issues.”

Our share market ended 2012 on a high, up more than 14% this year.

Economic commentator Michael Pascoe agrees: "The cliche used to be America sneezes, Australia catches a cold. Now America can have double pneumonia and we just wipe our noses."

The rebound in China has been cushioning our economy, however many believe we would be lucky to escape any fallout and we should be prepared.

Financial Planner Heidi Armstrong warns Australian families need to get smart: “They need to budget and they need to be prepared that there could be less dollars in their hip pocket."

Our Treasurer Wayne Swan is worried too, Taking to twitter to warn:

If anything, any economic slowing in Australia caused by the U.S. fiscal cliff could see another type of fall here - Interest rates.

It’s good news for mortgage holders, but Heidi warns: "Australian families need to make sure they don't use this opportunity to improve their cash flow, but instead they use it to reduce their own debt."