Australia's Swan warns of weeks of uncertainty ahead of "fiscal cliff"

Australia's treasurer, Wayne Swan, after talks with senior officials in the US has warned it would be several weeks before it was known whether the US would avoid a financial disaster with implications for the rest of the world.

In the course of an interaction with Fairfax Media yesterday, Swan said the so-called  "fiscal cliff" was paramount in everybody's minds in the aftermath of the US election, and anyone who thought it would not affect Australia were "kidding themselves".

The risks posed by the "fiscal cliff" figured prominently in his talks with the US treasury secretary, Timothy Geithner, the chairman of the Federal Reserve, Ben Bernanke, and the head of the International Monetary Fund, Christine Lagarde.

Concerns have been raised about the fall out of the savage cuts which would drive the US economy back into recession, affecting the economies of other developed nations.

The fiscal cliff was legislated last year with the Democrats and Republicans deadlocked on measures to reduce the deficit and in the belief at the time that after the US election, the stalemate would end and a more sustainable path would be agreed on.

However, with the Republicans retaining control of the US House of Representatives and the Democrats keeping the Senate after Tuesday's election, the markets slumped sharply, and the dollar declined amid fears the deadlock would continue.