World Bank president Robert Zoellick warns that world markets have entered what he calls a new danger zone.
He says investors have lost confidence in the economic leadership of several key countries.
Mr Zoellick told at the Asia Society's annual dinner in Sydney he also told his audience the global economy was going through a multi-speed recovery.
He said developing countries are now the source of growth and opportunity.
Global stock markets have suffered massive falls since the credit rating for the United States was cut on 5 August, and fear about Europe's debt problems flared once again.
