A senior Reserve Bank of Australia official warned that markets may be underestimating geopolitical and macroeconomic risks at a time when the global financial system is showing early signs of fragmentation.
Speaking at the Association of Superannuation Funds of Australia conference in Broadbeach, Queensland, on Wednesday, RBA Assistant Governor Brad Jones pointed to “emerging evidence” of divergence in how central banks manage reserves — particularly through surging gold holdings among a small group of countries.
“We see some emerging evidence of fragmentation playing out in reserve asset holdings for central banks,” Jones said. “There’s a certain cohort of countries that basically explain all of the increase in gold holdings from central banks and clearly the risk of asset seizure sanctions is sitting behind some of that.”
Jones also cited fragmentation risks in global payments and financial safety nets, though he stressed that these remain “more a fear than a lived reality” for now.
The RBA official said risk premiums across asset classes have fallen to “concerning lows,” suggesting markets are struggling to price in binary or geopolitical risks.
“It’s not so much that we think that the levels of risk premiums are completely unsustainable, we’re just surprised that there’s not a bit more reflected in those levels of spreads given what we observe, which is quite a confronting set of potential risks,” he said. “A lot of central banks are sort of scratching their heads as to why market pricing looks so benign.”
Jones’s remarks underscore growing official concern that financial markets have become overly complacent in the face of mounting geopolitical strains and international economic realignments. As central banks adjust to a more fractured landscape, the RBA is signaling vigilance toward both market behavior and the potential for shocks that test assumptions of policy intervention.
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