Australia declared itself well positioned on Friday to take additional measures to bolster the economy should turmoil in world markets turn into a re-run of the 2009 global financial crisis.
Treasurer Wayne Swan, looking to reassure the public and investors as the local share market dived to two-year lows, said Australia's economy remained strong and that the government had the capacity to act if conditions worsened.
"The most important thing is that Australia has strong economic fundamentals and one of the reasons we are so strong is that we avoided recession in the global financial crisis," he told a news conference called to respond to the sell-off.
"And because we did that, we have the policy flexibility to deal with uncertainty in the international economy should measures be required," added Swan, one of the first political leaders to canvass this option since the global sell-off began.
However, Swan stressed that despite some recent softness in the Australian economy, it remained the envy of most other rich nations, given its position as a major exporter to the strong economies of Asia, and its low unemployment and debt.
"Australia has low unemployment, a very strong investment pipeline, strong financial institutions and we are located in the right part of the world at the right time," he said.
"Growth in the Asia-Pacific remains strong."
Investors around the world dumped stocks and commodities on Thursday and rushed to the security of cash and government bonds, hammering equity indexes to their lowest levels of the year on fears of a spreading debt crisis and slowing growth.
Worries the euro-zone debt crisis was spiraling out of control sent blue chip European stocks to levels not seen since markets recovered from the financial crisis in mid-2009.