US Federal Reserve must tighten policy, says RBA board member

Mr McKibbin described debt-laden Greece as merely "the first carriage to break".

Speaking at the same conference in Melbourne, however, Treasurer Wayne Swan offered a different perspective.

"Some have a dire view of what's happening in Europe," he said. "I don't share those views."

The comments came shortly after Greece staged a last-minute escape from bankruptcy, passing a range of austerity measures designed to keep bail-out funds flowing from the European Union and the International Monetary Fund.

That news buoyed markets with the ASX 200 climbing 1.7 per cent to 4608 points, while the dollar soared against the US and hit a 26-year high against the British pound of 66.76 pence.

Since Monday morning the dollar has gained more than US3c against the greenback to trade last night at $US107.37.

The Greek parliament was to stage the second part of the vote last night.

Prof McKibbin - who stressed his views were his own and not those of the RBA - said Greece was just one of several nations that needed to rein in spending and increase taxes.

The US Federal Reserve has to tighten policy. You cannot give away money and have a vibrant economy. There has to be in Europe a tightening of monetary policy and there has to be some adjustment in Asia," he said.

In recent years, he has been a vocal advocate of tighter policy settings, pointing to rapid growth in commodity prices, fuelled by the emergence of China and India, as a risk to the global economy.

He also renewed his call for Australia to embrace a sovereign wealth fund, in part to help the Australian economy deal with a mining boom, which is fanning an enormous wave of investment with the economy.