Australia, until recently one of the fastest-growing developed economies, faces tougher times as its currency rampages higher and exports flounder.

The root of the problem is a bubble-like real estate boom and strong consumer borrowing, which analysts say the central bank is reluctant to support with interest rate cuts that would make the high-yielding currency less desirable.

The Reserve Bank of Australia chose this week not to follow Wither central banks and lower Australia's shortterin interest rotes, which at 4.75 percent are the highest for any country with a top credit rating.

The result was a rush on the Australian dollar, pushing the currency above 68 U.S. cents for the first time in five years as investors chased short-term interest rates 3.75 percentage points higher than they could get in U.S. dollars.

Concerns are growing that the soaring currency could lead to a tumble in exports, which make up about 20 percent of the Australian economy, and curb already slowing growth rates.

"The risks for a hard landing in the economy in late 2003 and 2004 have intensified," said Stephen Koukoulas, chief strategist at TD Securities.

"The strong Australian dollar, fueled by very high interest rates at a time of weak global growth, runs a risk of further problems in the export sector and disinflation," he said.

The decision not to follow the euro zone, New Zealand and the U.S. in lowering rates has angered exporters, already struggling under the combined weight of a severe drought, the SARS virus and sluggish global demand.

Exports have fallen for three of the past four months. 

Australia's economy, which boasted enviable annual growth of around four percent last year, is finally feeling the pinch. The latest data shows growth in the "wonder Down Under" has slowed to below three percent for the first time since 2001.

The current account deficit has expanded to six percent of GDP, more than the U.S.', as the country sucks in more goods and services than it sells.

The tough conditions have been compounded by a 22 percent rise in the Australian dollar this year as investors deserted low-yielding currencies such as the U.S. dollar and Japanese yen.

But, with Australian house prices in some major cities up by as much as 50 percent over the past two years, the central bank is worried lower rates will further inflate an assetprice bubble.

"It is regrettable that concerns relating to real estate may have influenced a decision which will clearly have much broader impact on Australian business ... and ultimately jobs," said Australian Industry Group Deputy Chief Executive Heather Ridout.

A falling currency shielded exporters six years ago during the Asian financial crisis and again when it stumbled to an all-time low of 47.75 cents in April 2001, helping Australia to avoid the fall-out from the U.S. tech wreck.