The Federal Budget could be pushed further into the red, with Wayne Swan warning the latest impasse over the US Budget threatens to damage the nation's finances.
As US Treasury Secretary Timothy Geithner warned Congress the debt ceiling was likely to be breached by Monday, Mr Swan accused "reckless" Tea Party members of holding the global economy hostage.
The US is burdened by the fiscal cliff, a self-imposed series of deep spending cuts which could push the economy into recession, and the $US16.4 trillion ceiling on government debt.
Mr Geithner raised the stakes on the debt ceiling overnight on Wednesday, telling Republican and Democrat congressional leaders he would have to take "extraordinary measures" to avoid a government default by year's end.
Beyond that, the country has until the end of February to resolve the issue which led Standard & Poor's to downgrade the US credit rating in mid-2011.
President Barack Obama ended his family holiday in Hawaii early to return to Washington for further talks on the fiscal cliff.
Mr Swan, the Acting Prime Minister, this month revealed his promise of a Budget surplus for 2012-13 was unlikely to be met because of dwindling corporate tax revenues.
He told _The West Australian _yesterday the tensions in the US political system would only make fiscal matters worse.
"The significant uncertainty in the US has the potential to do even further damage to our revenue base, so we're naturally following developments very closely," he said.
Mr Swan took aim at the Tea Party, accusing its congressional members of deliberately seeking to hurt not just the US economy but the world.
No matter what happened this week, a lot of damage had been done already because of the games played by Tea Party in Congress over the past 18 months, he said.
"It is truly lamentable that so much of the world's economic recovery after the GFC has been effectively held hostage in such a reckless way by this particular group of American lawmakers," Mr Swan said.