Today the Reserve Bank decided, against Henry’s advice, to leave the cash rate target at 6.25%. The RBA has ducked the issue of containing inflation, so we shall have a short-run issue with which to grapple for the rest of 2007.

For all those reader’s wiping their brow with relief, Henry wishes to remind them the extent to which the long-run costs of inflation are much higher than the short-term benefits of allowing demand to run too fast. Also, it is a pity that we’ll be worrying about a short-term issue like inflation, because the longer-run issues are exceedingly important and require a bipartisan approach.

Examples of such issues are the Treasurer’s intergenerational report, climate change and workplace reform. While there is plenty of room for debate about each issue, at least we are focussing on some weighty matters that will impact on our kids and their kids, and this is without even considering the geopolitical issues.

The smarties – chocolate ovoids covered with brightly coloured sugar – will ask what have our kids done for us? The smart economists will remind us that in the long run we’re all dead. The cynics will say the only thing certain about the future is the glorious uncertainty. But the shift to longer run concerns is welcome.

On IR: “Australian Bureau of Statistics figures released yesterday show trade unions lost a further 125,900 members last year … The Government’s line is simple: if workers don’t trust unions to run their personal affairs, why would they trust them to run the country?” Thus says the Oz.

So far, so good. To complete this round of reform and to give the government a fighting chance, Henry has suggested a “Fair Go Commission.” Disgruntled workers should have some place to appeal an employment decision they regard as unfair. The Commissioners should be charged to consider fairness not just in relation to the employees concerned, but also the effect on the business or the currently unemployed.

On Climate change: In this field the debate has barely started. Henry has long believed that prudence makes it highly desirable that we explore ways to fix the problem raised by concerned people even though the science of climate change is still uncertain. This is not the approach of the rabid climate change sceptics. They can delay what is likely to be necessary large scale action but no longer can this be blocked.

On Intergenerational report: While in the long run we will all be dead, planning for the time when the kids are in charge, and their kids are sprogging, is vital. The fact that people are working longer and Australians are breeding a bit faster is good news for the current crop of kids. Raising national productivity is the biggest challenge and so far Henry is unconvinced by the arguments on both sides of politics.

Read more at Henry Thornton.