More action needed on Europe debt: Gillard

16 Jan 2012, 2:55 pm   -   Source: AAP
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The prime minister said Australia's economy had sound fundamentals. (AAP)

The prime minister said Australia's economy had sound fundamentals. (AAP)

Prime Minister Julia Gillard says the European credit downgrade was not unexpected and more work is needed to get European nations' budgets on track.

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Prime Minister Julia Gillard says the downgrading of European nations' credit status was not unexpected and showed European leaders need to work to make their budgets more sustainable.

Last week Standard & Poor's downgraded the sovereign debt ratings of nine of the 17 countries in the eurozone. France and Austria lost their triple-A ratings.

"These downgrades were not unexpected but they do indicate there continues to be concern about the eurozone crisis by market participants," Ms Gillard told reporters in Hobart on Monday.

She said while steps taken late last year to set up a European liquidity fund and cut interest rates were in the right direction, more action was needed to address the "far-reaching" problems.

"The downgrade ... is likely to mean that paying off the debt is more expensive for those countries because it will be more expensive for them to borrow," Ms Gillard said.

"So it is absolutely critical that European leaders lay out credible medium-term plans to get their budgets on a sustainable footing."

The prime minister said Australia's economy had sound fundamentals.

"We have growth, we have low unemployment, we have low debt and we have inflation within the RBA's target zone," she said.

"That means the fundamentals in our economy are strong and ... different to those in Europe."

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