Australian PM rejects as alarmist warning that US deficits risk crash

Australian Prime Minister John Howard dismissed as “alarmist” a warning by the government’s chief economic adviser that the United States was heading for a financial crash that could ravage the global economy.

Secretary to the Treasury Ken Henry said Thursday the United States’ current account and budget deficits were creating imbalances in savings and investment that could lead to a sharp fall in the US dollar and a bond market sell-off.

Addressing a private meeting of Asian treasurers in Sydney, Henry likened a flood of money pouring into the United States to support its twin deficits to the stockmarket’s dotcom bubble of the late 1990s, saying it could push up US and world interest rates.