Reserve governor warns more trouble ahead

The governor of the Reserve Bank, Glenn Stevens, has warned that there may be further tightening in Australian financial conditions as investors around the globe continue to reassess their appetite for risk. “Risk pricing in general is going to look more like historical norms in the future than it has been in the past few years. From the point of view of the economic expansion that's actually a good thing,” he said. Mr Stevens identified lessons to be learned from the sub-prime crisis including the need to ensure that investors understand the nature of investment products and how market supervisors should respond to a sudden shortage of liquidity in markets.

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