Treasurer Joe Hockey is confident the United States will sort out its fiscal crisis and end a partial government shutdown but warns the solution may not be pretty.
The US Senate is scrambling to piece together a bipartisan exit strategy as the shutdown enters its 12th day.
House Republicans are blaming President Barack Obama for a collapse of talks on extended borrowing.
Mr Hockey is in Washington for meetings with the World Bank and International Monetary Fund.
He says the impact of a US debt default would be "catastrophic".
"I'm absolutely confident, having spoken to a number of congressmen and senators from both sides of the house ... there will be a resolution, it might not be pretty ... America will not default," he told Sky News on Sunday.
"We are in for a continuing volatile period."
Mr Hockey described the tactics of the Tea Party members as extreme.
"The lesson for us is to understand that it should never get to this point," he said, adding that governments must live within their means.
"America can no longer afford its lifestyle."
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