The Australian economy will be impacted if US political leaders can't head off a looming fiscal calamity, the Federal Government warns.
Party leaders in the US Senate are struggling for a compromise to avoid a punishing package of spending cuts and tax hikes due to come into effect on January 1.
There are fears if that happens, the US will plunge into a recession and global markets will recoil.
Assistant Treasurer David Bradbury says the global economy depends on a resolution of the impasse in Washington.
"If the US fails to reach a comprehensive agreement at this point in time of course that will have an impact on the Australian economy," he told reporters in Sydney.
Mr Bradbury would not say how the government would respond to any global fallout from the US going over the so-called fiscal cliff.
"I'm not going to prejudge any potential responses that may or may not come," he said.
Mr Bradbury insisted the Australian economy continued to have some very strong fundamentals, citing low unemployment, strong growth and public finances "second to none".
"But we all know that we're not immune to the shocks that can occur elsewhere in the globe," he warned.