The world is delicately poised on the edge of another economic crisis, according to one of Australia's top bankers.
ANZ chief executive Mike Smith used a trading update yesterday to give a frank assessment of the United States and European economies.
Mr Smith made the comments as the Australian sharemarket suffered sharp falls, with the All Ordinaries closing down 3.41 per cent, or 147.5 points at 4171.9.
''Europe is frankly a mess,'' Mr Smith said. ''And the United States, which I'm normally much more optimistic about, we've seen a crisis which was created by the partisan nature of its current politics.
''That's created further concern to what was already a pretty fragile recovery.''
Mr Smith said significant falls on world equity markets showed investors were concerned about weaker economic growth for most advanced economies. ''I think it is fair to say that right now this is all now very delicately poised,'' he said.
''I think further missteps from European and US policy-makers really risks converting the cracks in their economies into a much deeper global system crisis, which would have worrying economic and social consequences.''
But Mr Smith remained optimistic for the outlook in the Asia-Pacific region. ''The fact is that we are incredibly well positioned because of our linkage to Asia, which remains the best performing part of the global economy,'' he said.
Federal, state and territory leaders used a meeting of the Council of Australian Governments yesterday to discuss the economic climate and agreed that Australia was well placed to ride out the global turbulence.
Prime Minister Julia Gillard said the leaders had discussed the global and domestic economic situation during a dinner at The Lodge and at the COAG meeting itself.
''Clearly first ministers reflected on the volatility we've seen in global markets,'' she said.
''We also reflected on the fact that Australia has low unemployment, low debt and a pipeline of investment, that we are well placed to see through any global challenges.
''We had a discussion about the continuing confidence we have in the strength of the Australian economy.''
ACT Chief Minister Katy Gallagher said all of the state and territory leaders, including the three Liberal premiers, had expressed confidence in the Australian economy.
''Everyone was very supportive and agreed that perhaps confidence issues were out of kilter with the economic indicators,'' Ms Gallagher said. In its Monthly Bulletin of Economic Trends, the Melbourne Institute said yesterday the outlook for the Australian economy was continuing to deteriorate. The institute's Professor Guay Lim said Australia's was likely to experience modest GDP growth in 2011 and 2012. ''Australian households appear to be increasingly pessimistic about growth and employment, but their concerns about high inflation seem to be abating,'' Professor Lim said. with AAP