The Australian share market is trading down following on from Wall St’s decline as  investors digest the news on the debt and deficit blowout.

The benchmark All Ordinaries index is down 33.6 points or 0.65 per cent to 5131.

• Hockey’s fiscal ‘monkey trap’
• $5 billion Newcastle coal loading terminal approved

Oil producer BHP Billiton is down 91c to $27.42, Westpac bank is off 25c to $31.57 and one bright spot is Qantas up 8c to $2.35, Telstra  is down  2c to $5.72 on the back of its deal with the government on the National Broadband Network rollout and Wesfarmers lost 15c to $40.37.

The Dow Jones Industrial Average closed 0.6 per cent lower at 17,18 and the  S&P 500 closed 0.5 per cent lower at 1,993 as the oil price hit a fresh five and a half year  low.

The oil price fall was triggered  by comments from  OPEC chief and  Saudi oil minister Ali Al-Naimi, restating his determination not to cut output despite the energy glut.

As a result West Texas crude closed almost $US2 lower at $US55.91 ($A68.12) a barrel.

Some mostly positive economic data out overnight in the US helped to cap the falls on equity markets though.

Housing starts for November and building permits both rose and Federal Reserve figures revealed a 1.3 per cent pick-up in industrial production in the month, supported by car makers and utilities.

Across the Atlantic, markets dropped sharply as falling oil prices fuelled fears of deflation in the euro zone.

The Eurostoxx dropped 2.5 per cent and  London’s FTSE 100 lost 1.9 per cent.

Futures trade was pointing to a soft opening on the local market; at 8:15am (AEDT) the SPI 200 was 0.7 per cent lower at 5,141.

The Australian dollar was down to 82.24 US cents.

The key spot iron ore price went into retreat overnight and was worth $US68.60 a tonne.

Gold was down sharply, by $US28.69, to $US1,193.35 an ounce.