Obama warns US shutdown will cause global tremors

A shutdown of the US government over healthcare laws risks destabilising the world economy, President Barack Obama has warned.

A shutdown of the US government over healthcare laws risks destabilising the world economy, President Barack Obama has warned.

The President hailed the Senate for clearing on Friday a stopgap federal funding measure that knocked the ball into the House of Representatives, where a diehard conservative faction is bent on thwarting Mr Obama's healthcare law.

However, the Republican-led lower chamber will likely tweak the bill and send it back to the Senate, which could leave insufficient time for the legislation to pass both chambers before a fiscal year-end deadline of midnight on Monday (5pm Tuesday, AEST).

A shutdown could reduce fourth-quarter economic growth by up to 1.4 percentage points, depending on its duration, according to economists. The biggest effect would come from the output lost from furloughed workers.

The President made clear he would stand firm, saying a default "would have a profound destabilising effect on the entire economy - on the world economy".

"We've got to break this cycle," he said. "My message to Congress is this: Do not shut down the government. Do not shut down the economy. Pass a budget on time. Pay our bills on time."

With the threat of a shutdown likely to have "a dampening effect on the economy", Mr Obama suggested it was time for House Speaker John Boehner to isolate the "extremists" who are holding the Republican Party captive.

"Nobody gets to threaten the full faith and credit of the United States just to extract political concessions," Mr Obama said. "No one gets to hurt our economy and millions of innocent people just because there are a couple of laws that you do not like."

Concerns that the budget impasse will hurt economic growth helped push the Standard & Poor's 500 Index to its first weekly decline since August. The index fell 0.4 per cent to 1691.75 on Friday, and was down 1.1 per cent for the week. The rate on 10- year Treasury notes fell three basis points to 2.62 per cent yesterday.

"Let's keep this government running," Democratic Senator Mark Begich of Alaska, said. "Look at the markets the last few days. The shenanigans they're playing are causing the markets to falter and that's bad for the economy and bad for jobs."

House Republicans have voted more than 40 times to delay, defund or repeal all or part of the 2010 "Obamacare" law, which is designed to expand coverage to at least 30 million people. Some of the narrower proposals became law. The US Supreme Court upheld the law in June 2012.

The latest move marks a sharp turn for Republican leaders, who earlier this month tried to pass a plan that would have let the Senate strip out anti-Obamacare language and send the spending bill to Mr Obama.

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