In a notice to Congress, Bush said the hurricane had caused "a national emergency" that permits him to take such action under the 1931 Davis-Bacon Act in ravaged areas of Alabama, Florida, Louisiana and Mississippi.

Bush's action came as the federal government moved to provide billions of dollars in aid, and drew rebukes from two of organised labour's biggest friends in Congress, representative George Miller of California and Sen. Edward Kennedy of Massachusetts, both Democrats.

"The administration is using the devastation of Hurricane Katrina to cut the wages of people desperately trying to rebuild their lives and their communities," Miller said.

"President Bush should immediately realize the colossal mistake he has made in signing this order and rescind it and ensure that America puts its people back to work in the wake of Katrina at wages that will get them and their families back on their feet," Miller said.

"I regret the president's decision," said Kennedy.

"One of the things the American people are very concerned about is shabby work and that certainly is true about the families whose houses are going to be rebuilt and buildings that are going to be restored," Kennedy said.

The Davis-Bacon law requires federal contractors to pay workers at least the prevailing wages in the area where the work is conducted. It applies to federally funded construction projects such as highways and bridges.

Bush's executive order suspends the requirements of the Davis-Bacon law for designated areas hit by the storm.