The release overnight of the IMF's Global Financial Stability Report highlights the difficult global financial conditions we face and underscores the need for reforms to strengthen the global financial system.
In the July update to its Global Financial Stability Report, the International Monetary Fund (IMF) notes that global financial market conditions 'continue to be fragile'.
While recent events show Australia is not immune from global developments, we have strong, well regulated banking sector that is well placed to withstand the fallout.
Our banking sector is taking prudent steps by putting in place provisions to cover off the potential impact of the difficult global financial conditions and poor investment decisions of the past.
The Australian economy and financial sector are better placed than most other countries to withstand the current global economic turmoil.
We have a strong, well-regulated banking sector and a disciplined Budget position with a substantial surplus to provide a buffer against difficult global conditions. We are also continuing to receive high prices for our commodity exports.
The IMF's overall assessment is that risks to the stability of the global financial system remain elevated, particularly given increasing concerns over the global economic outlook.
While most of the expected losses on US sub-prime mortgage exposures now appear to have been taken, the IMF notes with concern the financial market effects of ongoing weakness in the US housing market, and the US economy more generally.
Amidst persistent uncertainty over the potential for further credit-related losses, funding costs for global financial institutions have risen and structured credit markets remain effectively shut.
The IMF argues that the ongoing financial market turmoil underscores the importance of moving forward with reforms to strengthen the global financial system as set out by the IMF International Monetary and Financial Committee and by the Financial Stability Forum (FSF).
Australia is participating fully in these efforts, for example by implementing the recommendations of the FSF and urging their wide adoption internationally, by working within the IMF to strengthen its crisis prevention role, and by working with other countries on strengthening early warning capabilities for global financial risks.