The Bank for International Settlements is the central bank for central bankers, helping them conduct international transactions.

But it also acts as a key observer of the global economy — with central banks focused on their own patch, the BIS keeps a watching brief over the international financial situation.

In that role, it was one of very few major financial institutions to see the global financial crisis brewing some time before it blew up in 2008.

In short, it is an organisation worth paying attention to.

In its latest annual report, the BIS argued global economies had a "vintage year" in 2017.

"The expansion strengthened and broadened. Global growth rates were roughly on a par with pre-crisis, long-term averages, and the expansion was highly synchronised across countries," it wrote.

But it warned these good times had been supported by cheap lending, with further growth likely to continue being supported by easy money, leading to further increases in already very high debt-to-GDP ratios.

Global debt levels have been on the rise since GFC. ( Supplied: BIS )

"Both monetary and fiscal expansions work to a considerable extent by borrowing demand from the future," the report noted.

"When the future becomes today, there is inevitably a price to be paid.

"This puts a premium on taking advantage of the current highly favourable conditions to redress the balance."

In particular, the BIS calls for economic reforms to boost productivity and allow for higher growth rates, gradual increases to interest rates to start moving them back towards more normal levels and to give scope to cut them again when the next downward cycle starts, so-called macroprudential limits on risky bank lending and repairing government budgets while avoiding stimulus (such as tax cuts or spending increases) in already-hot economies — a not-so-subtle warning to the Trump administration.

"The importance of this issue cannot be emphasised enough," the BIS cautioned.

"Public debt has risen to new peacetime highs in both advanced and emerging market economies.

"And, as history indicates, fiscal space is likely to be overestimated in countries where financial imbalances have been building up."

'Financial imbalances' & Australia's 'increased vulnerabilities'

That is a salient warning for Australia as well, where the forecast return to budget surplus could be easily blown off course if the economy deteriorates from current healthy growth rates.

Unlike most of the big advanced economies, which are in the midst of their upswings with some way left to run, the BIS warns that Australia, Canada and some Nordic countries may already be at or past the peak of their financial cycles.

These countries largely missed out on the "deleveraging" — or paying down debt — that occurred in many countries after the financial crisis.

In Australia, while businesses did reduce debt following the GFC, households did not, and instead ramped up borrowing as interest rates fell from late 2011 to buy houses and apartments, especially investors in Sydney and Melbourne.

"In some small, open economies not affected by the global financial crisis, house prices are high and also household debt is high," observed BIS general manager Agustin Carstens during a press briefing.

"There are signs of financial cycle-related imbalances in countries little affected by the crisis and financial cycles are turning in other economies.

"So the loose financial conditions during the last several years have contributed to increased vulnerabilities."

This is highlighted by a graph in the BIS report, which shows Australia's skyrocketing household debt levels relative to our recent history and other comparable countries.

Household debt has risen in Australia since the GFC and it now surpasses most other countries. ( Supplied: BIS )

"To mitigate these vulnerabilities, national authorities have been encouraging banks to tighten their lending standards or have adopted macroprudential measures," the BIS noted.

It is these macroprudential measures — such as limits on investor lending, interest-only loans, better borrower financial assessments and potential limits on high debt-to-income borrowing — that have seen the peak of lending growth and home prices passed in Australia.

The outstanding question is whether these imbalances have become too big to be successfully managed away without triggering a financial shock, house price collapse and economic downturn.

Reserve Bank governor Philip Lowe will be well placed to see what is happening in other similar countries, having been appointed over the weekend to a three-year term as chairman of the BIS Committee on the Global Financial System, which monitors and provides advice around financial stability issues.