Feds fret over financial stability

The short-term outlook for Australia's economy "is dominated by its transition from resources investment-led growth and risks associated with continued weakness in the global economy and the potential for renewed financial instability," outgoing treasury secretary Martin Parkinson warned last night.

Parkinson did not much elaborate on his final point, but returned to many themes promoted at last month's G20 summit in Brisbane.

"The policy responses to the [2008 financial] crisis have created new sources of vulnerability for growth and global stability," he said.

"To quote [IMF head Christine] Lagarde, we are seeing too much financial risk-taking and not enough economic risk-taking.

"Monetary policy needs to stay accommodative to support demand in the near term.

"But continuing risks to financial stability mean it is important to pursue financial sector reform alongside policy measures that will promote sustainable economic growth.

"It is for this reason that G20 Leaders endorsed significant measures to strengthen the global financial system - substantially completing the process of reform designed to help ensure the circumstances that led to the crisis do not re-occur."