Turns out we’ve had it all wrong – the big thing about the GFC isn’t how Australia survived it, but that the great beast saved us from ourselves.

“The GFC saved Australia” was a passing comment made by a visiting International Monetary Fund official to NAB’s chief economist, Alan Oster, during an IMF consultation on how Australia is travelling. It’s an insight he agrees with as it jolts a thinker into remembering the path Australia was on before the global financial crisis hit.

For me, that’s best demonstrated by recalling Wayne’s Swan first budget two years ago – the new Treasurer’s biggest problem was that the unemployment rate in May 2008 was 4.2 per cent, inflation had been unacceptably rising, the RBA had been bumping up interest rates and the bipartisan stupidity of the 2007 election campaign had locked a government without political gonads into unnecessary and inappropriate tax cuts.

The nation’s course coming out of 2007 was set for more inflation and more interest rate hikes as the RBA battled fiscal policy that remained too stimulatory, based on the sloganeering of Australians needing more money from the government instead the government reducing its stimulus or at least investing more wisely in productivity.

The outcome of staying on that course is well enough known – the RBA flays about with its blunt instrument until it gets the result of pain-induced business failures and rising unemployment, a result that takes more time to achieve. Such self-induced slowdowns have a tendency to overshoot into recessions – it would have been another one we had to have.