Australian Prime Minister Julia Gillard said on Sunday she was confident the resources-led economy would remain strong, pointing to solid Asian growth despite uncertainty from the US and Europe.
Consumer sentiment in Australia has plunged to levels not seen since the heady days of the global financial crisis, while Gillard's plan to place a price on carbon is also thought to have rattled consumers.
"There are some signs of increased risks from Europe and the United States," Gillard said, adding that Australians were cautious about spending after the global slump and natural disasters in Queensland, New Zealand and Japan.
"I'm very conscious of that but I'm also very conscious that the underlining fundamentals of our economy are strong. We are in the right part of the world, the part of the world where economies are growing."
Gillard, whose centre-left Labour government has plunged to record lows in polls, said the Chinese economy was growing strongly and Australia had a good budget position, low unemployment and a massive Aus$430 billion (US $458 billion) in mining investment coming through.