A senior public servant has warned of the potential for significant falls on asset markets in the months ahead.
A leading economist said these assets could include shares, property, bonds and crytpo currencies like Bitcoin.
The Australian Office of Financial Management (AOFM) issues debt securities on behalf of the Australian government.
Simply put, it issues IOUs to Australian banks, as well as overseas banks, governments, and central banks — the proceeds of which go to funding the country's budget deficit.
Its CEO, Rob Nicholl, has a unique view of global economic risks and the health of financial markets more broadly.
In a speech to economists this week, he warned asset markets could experience "significant" falls.
He said a decade of record-low interest rates and money-printing programs by central banks across the world was currently being unwound.
These programs have helped fuel a once-in-a-generation boom in property, equity and crytpo markets.
"After nearly 10 years of significant central bank asset purchases and the financial market behaviours that have been built around that, it is hard to imagine that unwinding this, even partially, will not involve significant relative asset price readjustment on a broad scale," Mr Nicholl warned.
The main stock index in the United States fell into bear market territory earlier this month.
That was a fall from its all-time high of 20 per cent or more.
The Australian share market is in "correction" territory — a fall from its August 2021 peak of 10 per cent or more.
"In fact, we have already seen this underway with purpose," Mr Nicholl said.
CEO's concerns are 'probably right'
Former ANZ Bank chief economist Saul Eslake said the warning about asset markets was warranted.
"It's an accurate statement of the difficulties facing central banks and governments," he said.
"Central banks don't know how [their easing policies] will complicate the increase in short-term interest rates.
"The cost of servicing debt is going up much more than has been forecast.
"He's probably right."
But given the already significant falls on global share markets, and several forecasts from the major banks that the average Australian property will fall in value between 10 and 15 per cent by the end of next year, can we expect the financial volatility to continue?
Mr Nicholl says yes.
"How far it goes and for how long it continues is difficult to forecast, but what is likely is that it will continue to be associated with strong bouts of market volatility," he said.
Mr Eslake said public servants were often given the freedom to be outspoken on issues immediately following a general election.
