There are two economic debates — or more accurately, debates about economics — going on right now.

One is the real world debate about the need to prop up demand and employment in the global economy, and to reform the global financial system so that what happened last year cannot happen again. That’s the debate that will shape Australia’s economic fortunes, China or no China, for the next few years. We can only go for so long relying on domestic stimulus and the growth of a single large economy.

The other debate is about whether the stimulus — or “so-called stimulus” as Malcolm Turnbull called it yesterday — worked at all, or contrarily worked so well that it now needs to be withdrawn (positions that in an impressive act of doublethink seem to be held by the same people) or whether it will drive up interest rates. That’s the debate the Opposition and much of Australia’s parochial and wilfully ignorant media — and even now the Greens — are mired in.

This is, we should not forget, the same mob responsible for such brilliant analyses as that tax cuts would be spent more than cash handouts, that we were facing a new Depression, or that we needed to wait and see or keep some “ammunition in reserve” rather than try to respond to the oncoming impact of global recession.

Or that the Government’s Budget forecasts were far too optimistic.

Remember the complaints about how Treasury had been too optimistic in May? Boy, didn’t Wayne Swan and Treasury cop it after the Budget for projecting a return to economic growth in the out-years.

Now they’re getting bagged for being too pessimistic. This joint’s full of puffed-up pundits and second-rate second-guessers who can’t even get it right with hindsight.

So the G20 finance ministers meeting on the weekend, to the extent that it made it into the local media at all, was reported in the context of whether it endorsed the Government’s position on the stimulus. Because, you know, everything must be reduced to a crass party political calculus. Only the AFR and David Uren at The Oz provided some proper analysis of the meeting outcomes.

The meeting was a prelude to the forthcoming G20 leaders meeting (to be held, inexplicably, in Pittsburgh, chiefly famous as the site of repeated zombie attacks in recent decades). It ended up almost perfectly in line with Kevin Rudd’s economic crisis rhetoric. In fact, parts of the Ministers’ communiqué, with their emphasis on “decisive” action could have been written by Rudd himself.

The colour and movement at the meeting was the Anglophone effort to head off a more aggressive regulatory push by the Europeans on finance sector bonuses. Despite his left-wing rhetoric on the crisis, Rudd has always been a careful centrist on the regulatory responses to the crisis. For Rudd, the size of executive bonuses wasn’t the problem, it was — as he made clear at the National Press Club last year — the incentives they created for short-term and risky investment. The Europeans thought the size was the problem and wanted to limit it. The Brits and Americans headed that off, in favour of a governance regime based on transparency, long-term requirements for bonuses, including clawback provisions, and greater independent oversight of bonuses by board compensation committees.

For those of us who’d like to see some more savage punishment meted out to investment bankers, the reforms will disappoint — especially as clawback provisions are a nice way to keep ex-bankers from spilling the beans on their companies’ dodgy dealings. Disgruntled bankers are much less likely to go to the press if they know they’ll lose deferred bonuses.

Ministers also agreed on a regulatory approach that would require banks to hold “more and better quality capital” —  and they mean both, with more work to be done on leverage ratios and the quality and liquidity of capital, to ensure banks are holding enough high-quality (as in, they exist in the real world), easily liquidated assets against borrowings.

There’s also a growing sense that the G20 wants to seriously pursue counter-cyclicality as part of its overall approach to prudential regulation. As much as the Reserve Bank might dislike the idea of “leaning against the wind” when it comes to bubbles in individual asset classes, the broader international trend toward “dampening rather than amplifying economic cycles” is gathering pace. But counter-cyclicality is still — at least it seems to this ignorant observer — highly speculative and theoretical territory for economists, let alone regulators. Both will need to be at the top of their game for it to work effectively.

The meeting also singled out non-compliant tax havens, which are likely to face sanctions, and systemically important financial institutions, which will face extra regulation and oversight. However, there appears to have been no further move on the regulation of credit ratings agencies beyond the registration previously agreed by G20 leaders. Given the only appropriate regulatory response to Moody’s and Standard and Poor’s contribution to the financial crisis is corporate capital punishment and the jailing of their senior executives, this is a poor outcome.

The only other jarring note in the communiqué is the reference to “an ambitious and balanced conclusion to the Doha Development Round”. That single world “balanced” clearly indicates that there is no will for the Doha trade round to achieve anything. A “balanced’ outcome from Doha would preserve currently developed country protectionist frameworks in exchange for looking after developing countries’ agricultural sectors. The only and limited consolation is that we have one of the world’s best trade ministers in Simon Crean.

Nevertheless Wayne Swan, who is returning via India, can be well pleased with the G20 outcome. Indeed, as an aside, Swan is now filling the chair in the Treasurer’s role. He looks more confident and assured in his grasp of issues. Vindication will do that — vindication by the economic data, and vindication on the OzCar business. He was the victim of an outrageous verballing by Michael Stutchbury on Saturday, when he claimed Swan had “crowed” about the GDP figures last week, when the Treasurer had done nothing of the sort and in fact had done what he always does — downplayed them.

Meanwhile, the Opposition are trying to develop a narrative that the inevitable return of interest rates from emergency lows to less stimulatory settings is the fault of the Government’s stimulus package (when it’s working). It’s an odd argument because, given they feel there’s a need for less stimulus, it shouldn’t matter to the Opposition whether the reduction in stimulus is provided by the RBA or the Government. Still between that and trying to connect Kevin Rudd to NSW Labor (as Laurie Oakes pointed out yesterday, none of the top four figures in the Government are from NSW), that’s all they seem to have.

What the Opposition doesn’t realise is that every time they talk about the stimulus, they’re engaging in exactly the debate the Government wants to have. They might object to stimulus signs in schools, but they’re happy to advertise the Government’s economic success at length and for free.