On the face of it, Australia seems to have dodged most of the bullet that hit the world economy about a year ago.  Though we are the only developed country to avoid a technical recession, Kevin Rudd should resist the temptation to gloat at the G20 meeting in Pittsburgh next week.

About a year ago, Lehman Brothers, the storied New York bank, collapsed.  And for a time, a re-run of the 1930s’ Great Depression seemed possible.  The dangers of inter-connected credit swaps backed up by loans people couldn’t afford to repay became clear with alarming speed.

Large profits came back quickly, too.  Goldman Sachs, soon after taking taxpayer bailouts, is rolling in it again.  It can’t repay the bailouts fast enough, so it can break free from the salary constraints the U.S. Government imposed.  With each green shoot that appears, it’s more like business as usual every day.

That’s a problem.  And Mr Rudd should argue less with John Howard about what happened before, and prepare more for what’s needed next.   This is not to say our history is a failure.  Preventing big banks from merging, having better corporate law stemming after HIH Insurance collapsed and closer trade links with China did shield Australia from the worst of the global financial crisis.

But there are problems, too: the gradual privatisation of monetary policy; diminished competition especially in mortgages; off-shoring jobs and longer wait times for customers; and alarming levels of household debt.

If Mr Rudd arrives in Pittsburgh pretending Australia has it all right, it will be an opportunity missed.  Instead, he should present us as we are: better regulated than some, but still with some way to go.  And if he’s serious about increasing Australia’s clout in global forums, he should vow to make us the best-regulated world economy by learning from our mistakes.

Take Storm Financial.  It collapsed for the same basic reason sub-prime mortgages in the U.S. did.  People had loans they could not afford, and when the paper value of the “asset” declined, the company went south, taking thousands of life savings with it.

Yet, despite seniors being approved for massive loans based on fictional, six-figure monthly incomes, the Government gives the impression too often that we were immune from the short-sightedness behind the financial collapse.  We were not.

In North Queensland, Storm Financial’s ground zero, the Commonwealth Bank increased sales targets for loans by $170 million in 2007-08; $130 million was ear-marked for new Storm sales.  To put that into perspective, North Queensland’s sales targets went up by about the same as Brisbane—with only half the lenders.

Across Australia, the story is the same.  Even as the economy weakened, sales targets for high-debt products like credit cards increased.  Yet, new consumer credit laws seem set to ignore how people get debt in the first place, despite its clear links to how the global financial crisis began.

Since 1990, household debt has risen from $190 billion to $1.1 trillion in today’s dollars.   Banks say there is no problem because default rates have yet to soar.  But Americans weren’t defaulting on sub-prime mortgages until, well, they started to.

In any event, the time to fix structural problems is when there is not a problem.  So as Mr Rudd heads off to Pittsburgh, it’s time he moved beyond criticising neo-liberalism’s failings to making Australia a leader in regulating a better finance sector.  There are three key things he can do.

The first is to attack the sales-and-bonus culture that permeates the finance industry.  While year-end bonuses get the news and certainly rankle, sales targets for bank employees remain the hidden crisis.  As long as remuneration is linked to selling more debt, Australians’ debt level will increase, making us more vulnerable to interest rate hikes or rising unemployment.

Mandatory disclosure of any incentive or commission to the consumer would be a good place to start.  Mr Rudd has an ideal opportunity to do so, through the consumer credit protection bill before Parliament.  The review of executive salaries can also incentivise long-term thinking over short-term risk by taking a hard look at big executive bonuses.

The second is to continue the deposit guarantee, but attach conditions to it.  Deposit guarantees are common-place in comparably-regulated countries with stable banks like Canada.  But there is no reason Mr Rudd can’t require investments in Australian skills and jobs in return.

Our big banks, after all, have become so large they’re too big to fail.  More and more, they are usurping the Reserve Bank’s role in implementing monetary policy.  As their power increases, regulations should, too, to require banks to act in the country’s interest as well as their own.

And lastly, Mr Rudd should stand firmly with countries urging a coordinated, regulated fix for the world’s financial system.  Taxpayers footed enormous bills to rescue banks from themselves, and lost millions of jobs.  Along the way, banks lost their right to go back to business as usual.

If Mr Rudd wants to show himself a great reformer, Pittsburgh is a good place to start.