Schwarzenegger has pulled off his first political coup

Mr Schwarzenegger, who is campaigning to become governor of California, has said Mr Buffett will help him assemble a panel of experts to advise him on the economy.

The move is likely to boost Mr Schwarzenegger's credibility as a candidate considerably, even though the two would appear to be unlikely bedfellows.

As chairman of investment group Berkshire Hathaway, Mr Buffett is one of the financial world's most respected figures.

Good friends

Unlike Republican-supporting Schwarzenegger, he is a Democrat who has spoken out in favour of higher taxes.

The derivatives business is like hell - easy to enter and almost impossible to exit Warren Buffett Profile: 'The sage of Omaha'

But the pair are apparently good friends and have talked economics together in the past.

"I have known Arnold for years and know he'll be a great governor," Mr Buffett said.

"It is critical to the rest of the nation that California's economic crisis be solved, and I think Arnold will get that job done."

Mr Schwarzenegger described Mr Buffett as "truly a giant" in the world of finance.

Formidable reputation

Mr Buffett, dubbed the Sage of Omaha, is the son of a Republican congressman.

He has amassed a formidable reputation - and a huge personal fortune - by buying into well-known, but underperforming companies.

He famously failed to be taken in by the dot.com bubble, enhancing his reputation as a financial oracle.

"What he will be doing is assembling other prominent business leaders and economists and setting up a team to address the issues facing California," said Schwarzenegger campaign spokesman Sean Walsh.

Political ambitions

Until now, Mr Schwarzenegger, a former Mr Universe, has been better known for his "I'll be back" catchphrase and robotic screen persona than his command of economics - or his political ambitions.

He announced his intention to run for governor of California on the Jay Leno show last week, after weeks of speculation.

He joins a motley collection of 158 hopefuls, including porn magnate Larry Flynt and diminutive actor Gary Coleman.

Elections for a new California governor to recall incumbent Gray Davis have been set for 7 October.

Mr Davis has been criticised for his inability to handle the state's budget deficit and its crippling energy shortages.