Kevin Rudd is strutting the country this election campaign saying he saved Australia from the global financial crisis. Tony Abbott, on the other hand, says John Howard’s prudence saved Australia, and that Labor squandered more than was necessary to save us.

Both are simplistic and only partially accurate.

Australia was spared because its housing, financial and ratings markets and central bank had never been infected with the outbreak of the American disease of rampant interest-rate cuts and rampant deregulatory capitalism that began in the 1990s. I am reading an enlightening and myth-busting account of the crisis in the US by CNBC’s David Faber called “And then the Roof Caved In”. It has been sitting in my (electronic) library for a while squeezed between two old favourites: “Learning from Bitter Experience Rather than Reading History” and “Why Don’t Those Idiots Make History Compulsory in Schools”.

When you look at it, Australia was never going to have a housing bubble as big as that of the US or a bursting of that bubble so spectacularly. For decades, the Federal National Mortgage Association (popularly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) provided the lion’s share of US mortgages in a responsible way: demanding 20 per cent deposits and verifying income. They also got much of their capital from repayments on exiting mortgages. When they dropped out of the market briefly following minor accounting scandals, the way was open for other operators who did not verify income or demand even modest deposits – sub-prime mortgages. Some mortgages had low interest in the first two years to entice people in. They were egged on by Congress. They should have been restrained.

Then as the Federal Reserve cut interest rates dramatically after the 9/11 bombings, money came easier. New mortgage companies sprang up and started writing ever more sub-prime mortgages. But they needed to on-sell them to get capital for new mortgages because they did not have big capital bases themselves. Enter the big Wall Street companies. They bought the mortgages and bundled them up and sold them as securities. The rating agencies then gave those securities top credit ratings. Foreign investors bought them. All was well till the price of houses levelled then fell. People could no longer re-finance to stay afloat. They had to sell. So prices fell further. Holders of the new securitised mortgages (many outside the US, but very, very few in Australia) lost their money, spreading the crisis.

None of this happened in Australia. We had four big banks controlling the lion’s share of the mortgage market. They were big enough not to need to on-sell their mortgages. They were happy to keep them on the books and finance new mortgages from the repayments and from borrowings overseas at a profitable rate. The four banks – even in the heady days of rising house prices – still required reasonable deposits and proof of income. They could do that. There was no leaching of market share to mortgage originators with access to buckets of money from Wall Street. The banks’ pleasant little oligopoly saved Australia. The Hawke-Keating Governments opened the banking system, but not wide enough to let the cowboys in and they handed monetary policy over from the politicians to the Reserve Bank. They insisted on a certain amount of banking regulation which spilled down into far more prudent lending policies. Mortgagee sales were rarer in Australia than the US.

Also, our Reserve was far more measured that the US Federal Reserve which behaved like a drunk in charge of a large truck from 1991-2009. Here are examples from those years. The US Fed moved rates from 8 per cent to 3 per cent in 3 years; from 3 to 6 in just one year; from 6.5 to 2 in a little over a year; from 1 to 5.5 per cent in two and half years and from 5.5 to half a per cent in 18 months. Behind all that measured finance-babble that came out of Alan Greenspan’s mouth the Fed was behaving like a manic-depressive. Our Reserve Bank, by contrast, under Ian Macfarlane and Glenn Stevens, was the voice of measured calm. If anyone saved us from the global financial crisis it was Paul Keating and Glenn Stevens.

The US Fed still hasn’t learned. It has had interest rates at less than a half of one per cent for four years. As a monetary weapon in the US, interest rates are now just the hilt of a sword with no blade So, the Fed just prints money and hopes all those gullible in-awe foreigners will keep buying it and investing in US debt. It can’t last. The US does not have the political will to give up its 25-year orgy of military spending or to start taxing its wealthy more sensibly, so something will have to give. Australia, on the other hand, has a much better institutional base than the US. Mercifully, that will temper the hand of whichever side of politics wins next week’s election. But we cannot shield ourselves totally from the world. The US money-printing exercise is bound to affect our foreign markets and therefore us.

Our private and public debt is rising, not dramatically, but with debt it is so easy to be complacent. So easy to spend; so hard to save.