So how would we be faring if the Coalition had won last November? If John Howard and Peter Costello were running the show instead of Kruddy and Swanny?

Conventional wisdom is probably that, given the Coalition’s record of economic management, the soothing presence of Howard and Costello would be comforting Australians that all would be well. After all, Costello predicted a financial “tsunami” last year, although inconveniently he reckoned it would come out of China, not from the very Holy of Holies of capitalism, Wall St.

I’m not so sure. Given his form in exploiting 9/11 and terrorism for domestic political purposes, Howard’s first order of business would doubtless have been trying to use the crisis to inflict maximum damage on the ALP. If Rudd or whoever was leading Labor had dared to make the sorts of complaints about bank consolidation or failure to pass on interest rates made – rightly – by Malcolm Turnbull, a full-blown campaign would’ve been launched against him by the Government and its cheerleaders about his economic incompetence and unfitness for office. Moreover, Howard would also be using the crisis as an excuse to yet again delay his retirement, generating Episode 49 of the Will-Costello-Challenge saga. And that’d be exactly what Australia needed at this point – a Treasurer in bitter conflict with his hated Prime Minister. Again.

Howard would also be seizing on the crisis to delay any action on addressing other issues like climate change. Remember that? Only a genuine world-wide depression is going to seriously slow the rate of emissions growth. Short of that, we can’t hit the Pause button on the greenhouse effect while we get our economic act together. Think we can’t afford to be distracted while we avoid an economic catastrophe? Too bad. You can ignore climate change, but that will just make it worse.

All it does is yet again point out the appalling folly of failing to do something during the boom years, when we could’ve established an emissions trading scheme and god knows what else standing on our heads. A big thank you to John Howard and the Liberal Party for so comprehensively screwing us on that.

The Prime Minister and Treasurer have handled things well thus far. Their Big Jack Sobersides We’re-Very-Serious-About-All-This act is getting a little boring in its repetition – what sort of shape are our bank balance sheets in again, Kevin? – but this isn’t the time for Obama-esque soaring rhetoric, as even Dennis Shanahan has worked out (and by the way wasn’t it SO predictable that Michael Costa ended up at The Oz?).

But they have yet to show that they can keep the key policy balls in the air while coping with a major economic crisis. Australia will still have skill shortages, and infrastructure gaps, and flaws in its tax and incomes system, and a predisposition to oligopoly in its major markets, when the crisis comes to an end, as well as facing the costs of climate change. Rudd and Swan need to find a way to keep talking about those long-term and structural issues and ignoring the inevitable complaints that they are mere distractions from the real issue of panicking about the financial meltdown.

They also have to deal with the problem of the states. Like the Howard Government, state governments failed to invest the benefits of the boom years in their infrastructure and balance sheets. Unlike the Howard Government, many of them were also incompetent managers. The NSW Government, in particular, would have struggled to cope even if the boom had continued, and is wholly unprepared for a significant slowing of growth. The mismanagement of State Governments could be Rudd’s Achilles Heel – and not just politically, but economically as well. This puts extra pressure on Rudd to get “cooperative federalism” working as well as possible, at a time when he will have less money to use as bribes – the traditional means of getting the states to engage in any serious reform.

The involvement of state governments in infrastructure investments, in particular, is going to become more problematic. The comments by Infrastructure Australia Coordinator Michael Deegan that the states have served up a bunch of half-baked schemes without any decent supporting evidence is deeply worrying, because it shows that an entire level of government still doesn’t understand that infrastructure is about more than vote-buying or Keynesian pump priming. Infrastructure Australia could do worse than simply sideline State Governments and rely on industry and environmental groups to identify the projects they think will yield greatest returns. It is Commonwealth money, after all, and there’s nothing wrong with offering funding for projects to the states on a take-it-or-leave-it basis.

In short, Rudd has not just got a major economic meltdown to deal with, but the sort of historic problems that would tough nuts even when times were great. The only saving grace is that Rudd looks like the sort of guy who loves a challenge – and the more the better.