The world economy is on the edge of another economic crisis, ANZ chief executive Mike Smith says.
Mr Smith said the fragile economic situation in the US and Europe in particular, was "delicately poised" and this was likely to cause global markets to remain volatile for some time to come.
He labelled Europe "a mess" and warned that failure by political leaders to tackle the economic problems could lead to a much wider global crisis.
The senior banking boss also said he remained positive over the longer-term outlook for the Australian economy given its close links to the fast-growing Asian region. He was also surprisingly upbeat on the outlook for business lending.
His comments came as ANZ this morning reported a 1.3 per cent increase in third-quarter profit to $1.4 billion.
Speaking to investors, Mr Smith said the vulnerabilities that built up in the world economy before the financial crisis would still take some time to work through.
"Europe is frankly a mess, with quite genuine concerns about the solvency of countries such as Greece, Ireland and Portugal [and] the contagion effect that has on countries such as Italy and Spain," he said in a conference call.
"In the US - which I'm normally much more optimistic about - we have seen a crisis which has been created by [the] partisan nature of its current politics and that's created further concerns to what was already a pretty fragile recovery," he said.
He said the massive volatility in equity and credit markets since the Standard & Poor's downgrade of the US credit rating was clearly a signal that markets were concerned about softer growth in most advanced economies. It also reflected the lack of a clear plan from policy makers.
"It's fair to say that right now this is all very delicately poised," Mr Smith said.
"I think further missteps from European and US policymakers really risk converting the cracks in their economies into a much deeper global system crisis, which will have worrying social and economic consequences.
"Until that fundamentally gets sorted out we're going to have more of this volatility," he said.
ejohnston@theage.com.au
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