US economy weaker: Australian central banker

SYDNEY (AFP) - The United States economy has weakened, but global growth forecasts remain strong, Australia's central banker Glenn Stevens said Friday amid a lingering crisis in the US sub-prime mortgage market.

Stevens said while financial markets were extremely skittish following the fallout from the US credit crunch, the softness in the US had been offset by robust growth elsewhere, especially in China.

"Downside risks to the US economy do appear to have increased over recent months, but in other parts of the world the growth outlook has, if anything, been marked higher recently," Stevens told a parliamentary committee.

"Most likely the global economy has pretty strong fundamentals. It's true that the US is weak at the moment, but other areas of the world have been accelerating over recent times, particularly China."

Stevens, who is the governor of the Reserve Bank of Australia, said that the potential losses from the US mortgage problems were still being assessed and this had left investors uncertain.

"Financial markets globally have recently become extremely skittish and there has been a very sharp re-assessment of risk and a sudden desire for liquidity," he said.

Stevens said the strength of the global economy, the good capitalisation of financial institutions, and good corporate profits in most countries would be helpful if the credit crunch persists.

"Indeed, global growth has of late been sufficiently strong that some moderating effect would be welcome," he said.

"Sometimes, however, the ensuing retreat can go too far, resulting in a widespread withdrawal from the provision of credit that unnecessarily crimps the pace of economic expansion."

Stevens said the bank would monitor the unfolding crisis carefully.

"As far as risks to that forecast are concerned, the possibility that the world economy might end up being weaker than assumed, due to a persistence of credit difficulties, is one that everyone will have in mind at present," he said.