Who says pattern bargaining is out? The Federal Government and employers are now all for it — as long as the relevant pattern is less money. Workers “must restrain any wage claims,” the Prime Minister said bluntly on Monday.

There we were thinking each individual enterprise should be negotiating employment agreements reflecting its own circumstances. Ah well. Who’s to complain when unions themselves are talking of deferring wage rises. And if the doom-mongers are right and we get some serious deflation going, we can all have real wage rises without lifting a finger.

As Sharan Burrow has correctly noted today, wage moderation won’t do much to stimulate demand in the economy. But we’re now in vexed policy territory on the whole issue of demand. Gerry Harvey, in his own sublimely self-centred way, is on to something when he wonders whether last year’s stimulus package was the best way to go, given its temporary effect. Now there’s talk of a second stimulus package. This approach, of lurching from one adrenaline shot for demand to the next — without even waiting to see what the effect on the patient’s vital signs are — isn’t sustainable, if only because there’s a very real risk of running out of rooms across the country to put plasma TVs.

Malcolm Turnbull wants any new stimulus package to be “very disciplined, very focussed” — which in his logic is tax cuts. Tax cuts are quite the opposite of “disciplined” and “focussed” since taxpayers can use the money however they like, including sticking it under the bed, in the bank or in shiny consumerist baubles made in China. But most of the economists contacted by Crikey yesterday wanted next year’s cuts brought forward, although John Edwards was arguing to the AFR today that the Government should focus on propping up construction.

While we argue over that, let’s not forget the broader question of whether any package, however constructed, will have minimal effect in offsetting the effects of the global recession and what might be Round Two of the financial crisis now emerging in Europe.

Repeated stimulus packages have long-term consequences for the budget, but we know how to fix that, even if politicians hate cutting spending or raising taxes. The longer-term consequences of other aspects of the Government’s response to the financial crisis are arguably more significant and may be far more difficult to unwind.

In the last six months, governments across the globe have gone from being more or less — usually less — diligent regulators of financial markets, to occupying central roles in their national and international financial systems. In Europe it’s been nationalisation in all but name. In the US it’s been bailing out Wall St and forced mergers. The health of Australia’s major banks, however, has meant we’ve opted for something more like a corporatist model, with the Government working closely with the gougers and rorters who make up our banking oligopoly to initially ensure financial stability, and then to cover the retreat of foreign capital from the motor vehicle finance market.

Now, as Kevin Rudd warned yesterday, the retreat of foreign capital is becoming a much larger threat.

Some cash-strapped foreign banks are scaling back their lending in foreign markets such as Australia. If banks do not allow clients to re-finance as they would in normal conditions, then companies can be forced to sell assets, often at low value. This endangers their financial health and that of the whole economy.

According to Merrill Lynch, lending by overseas banks represented more than half of the 285 billion in syndicated loans that have been issued to Australian businesses since 2006. Of those outstanding loans, 75 billion is scheduled to fall due over the next two years.

If foreign banks do not roll over their share of these loans, it would be difficult for Australia’s four major banks to fill the gap on their own. The withdrawal of foreign bank lending, the tightening in domestic bank lending and the dramatic falls in stock markets are all hurting the real economy. Growth in business debt more than halved in the six months to September, compared to the same period a year before.

It’s a telling sign of how the world has changed that such arcane financial issues are now the stuff of major Prime Ministerial addresses. Rudd’s rather anodyne response to this threat is that “we will continue to work in partnership with the private sector to do what we can to support Australia’s credit markets.” This means more work for the Government-banking oligopoly combination. Bankers and officials have been busy discussing options while the rest of us were having a break.

This approach — and this is not to suggest there’s a viable alternative — is not merely entrenching the position of the major banks, which have been allowed to consume competitors, but also entrenching the Federal Government at the heart of our financial system.

It’s not nationalisation; it’s more like the worst of both worlds. Politicians and bureaucrats are now key decisionmakers in our financial system, but they have limited control via the major banks, which continue to operate — as they’re required to — in the best interests of their shareholders. Responsibility and accountability are diffused between ministers, Treasury, agencies and the banks themselves. And there are multiple ways in which it could go wrong. Taxpayers could be left, via government guarantees, with failed businesses and debt. Business might struggle to obtain necessary capital. The only guaranteed winners are the big banks.

Based on its performance at last Estimates, the Opposition isn’t equipped to even begin exploring these issues via Parliamentary processes. And that’s assuming it’s interested in doing anything other than scoring cheap points.

The AFR’s editorial today on this mess noted “extraordinary times call for extraordinary measures, but their long-term effects are likely to be profound, and they need to be managed with as much care as possible…”

Those long-term effects have been more or less ignored until now, in the urgent need for action. What’s the Government’s exit strategy to eventually remove itself from its now dominant role in the financial system? Does it intend to exit at all? And how much of a trade-off are taxpayers getting from the privileged financial and policy-making role now accorded the banking oligopoly?

The working theory, both here and overseas where the simpler option of nationalisation has had to be pursued, is that governments shouldn’t be in finance, and will get out just as soon as they can while maintaining the stability of the financial system.

This may prove to be wishful thinking, and not only because the duration of the financial crisis and the wider recession is unknown. Wartime policies have a habit of persisting long after victory has been declared. Our better economic thinkers should be turning their attention to the new financial system we’ve suddenly acquired over the last six months — and how much of it we want to keep when — if — things get back to normal.