Howard says safe hands better than new blood in trying times

John Howard (right) says sound management at home can guard against overseas market issues. Photo / Reuters

Australian Prime Minister John Howard says the decision by the US Federal Reserve to cut interest rates in a bid to prevent a slow-down in the world's largest economy is a reminder that prosperity cannot be taken for granted.

The Fed cut its interest rates by a larger than expected 50 basis points overnight in the face of a housing slump and stress in global credit markets.

"What is happening in the United States is a reminder that you cannot take economic prosperity for granted," Howard told journalists.

"It's a reminder that economic management is always a finely balanced challenge.

"At a time like this there is a real premium on strength, experience and a track record. There are some storm clouds gathering internationally, it's not a wise time to experiment in inexperienced people."

Howard said he would not speculate on future movements in interest rates which remained in the hands of the Reserve Bank of Australia (RBA).

But he said it was obvious that Australian financial institutions were strong and banks were stable, well-regulated and profitable.

"That is a good thing at a time of international economic stress. It's very important to have profitable financial institutions," he said.

"We do not have anywhere near the percentage of sub-prime loans. It's about 1 per cent in this country, versus 15 per cent in the US.

"But such is the nature of international financial linkages, you cannot isolate this nation from what happens in other parts of the world and that is where domestic economic management comes into the equation."

Howard said it was not a scare or a fear campaign for the Government to point out the fact that Labor had no tax policy.

"If Mr Rudd regards a criticism of him as a smear campaign, then he's got a very thin skin," he said.

"It is perfectly legitimate to attack somebody's lack of substance."

Howard said what the Australian people wanted to know was which side of politics was better able to protect economic security in this time of international economic doubt.

"Which pair of hands are ... more experienced in looking after the Australian economy as some of these storm clouds gather in other parts of the world," he said.

- AAP