Back at the start of the year I suggested the economic crisis had taken us into a new world where the role of government had been transformed, and hoped that our best economists should start thinking about where we go from here.

Today several of our best economic thinkers from across the ideological spectrum did exactly that, with an open letter urging a comprehensive review of the Australian financial system — and how it interacts with those across the globe.

The timing couldn’t have been better, coming the day after Malcolm Turnbull revived the debt truck from the early nineties and the ALP — who had evidently been waiting for just such a moment from the Coalition — replied with the clunkier “Supporting Jobs Truck”, which presumably hasn’t been donated by John Grant. While our politicians mess about with trucks, there are pressing issues to deal with.

There are a couple of key issues identified by the economists that have so far not received the attention they deserve. One is that the collapse of the residential mortgage-backed securities (RMBS) market — in essence, non-major bank lenders — has indirectly put pressure on business lending, and particularly higher-risk business lending, because the big banks have moved to fill the gaps left by the RMBS market. This goes, as the Prime Minister would say, to the vexed issue of whether bank capital costs really have increased, as they claim.

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Another is that it is not merely global capital markets that are interconnected, it is government policy that is similarly interdependent. New policies already implemented, and being now developed in other countries will have significant impacts on the Australian financial system, but we don’t as yet have any comprehension of the nature of these impacts — and no process for doing so.

Above all, they worry that it may have been good luck rather than, or in addition to, good management that meant the Australian financial system was relatively safe from the sort of disasters that beset the American and European systems. How will we fare next time?

The letter raises fourteen specific questions, each of them meaty issues. There is plenty to alarm the big banks, but the most disturbing will be a suggestion that consideration be given to a basic financial service based on existing Government infrastructure such as Australia Post.

In particular, the group wonder whether there is a role for a publicly-owned entity like Kiwibank in New Zealand, which operates from post offices and participating retailers, but offers both deposit-taking and lending, including business lending.

A more minimalist option would be the establishment of a deposit-taking entity that invested in the Future Fund. That would increase competition for deposit interest rates, whereas a full Kiwibank model would challenge the big banks across most of their activities. It would require significantly greater infrastructure and expertise than a simple deposit-taking entity, but not necessarily need to replicate the full branch-based structure of the major banks.

The proposal flies in the face of what was accepted wisdom before September last year; now, however, even in Australia government is deeply enmeshed in the financial system via the bank guarantee and its own efforts to prop up the RMBS market (not to mention the stillborn ABIP proposal).

It merits serious consideration because the long-term project — pursued by both sides of politics — to maintain competition in lending in Australia is failing. It depended on the availability of externally-sourced capital for the RMBS market, which was fine while the world financial system was spilling over with finance but ended the moment the crisis hit — especially after the bank guarantee massively strengthened the hand of the major banks over what was left of the non-bank lending sector.

Now we are left with a true oligopoly, operating in a manner indistinguishable from a cartel and unable or unwilling to reduce business lending rates.

It’s hard to see what downsides there are for the Government in conducting the sort of inquiry urged in the letter. It has handled the triage stage of the financial crisis very well. Now is the time to take a step back and consider an overarching strategy. As the Prime Minister noted in his comments overnight in Germany, managing the recovery sustainably will be as challenging as managing the crisis itself.

How long until the Government is again confronted with one of the banks unilaterally raising interest rates, particularly for business lending? The problem of Australia’s banking oligopoly needs a long-term solution.

Crikey understands that one of the Wallis Inquiry members, Prof Ian Harper, also strongly supports the idea of a new inquiry.

As Christopher Joye told Crikey, “…the financial world has changed more in the last 13 years since Wallis than it has in the last 40 years… The key message of the letter is that it would be a massive mistake for the politicians and bureaucrats to persist with the self-congratulatory hubris. The fact is Australia was very lucky to skate through the crisis unscathed. Our system is good, but also has many glaring flaws.”

Something for the politicians to think about while they’re playing with trucks.