SHOULD BE COMPLETELY DISREGARDED. IT HAS NO OFFICIAL STATUS WATSOEEVER. THE BUDGET SPEECH ESTIMATE OF 4% IN REAL TERMS
IS PROBABLY ON THE OPTIMISTIC SIDE DESPITE A FAIRLY SATISFACTORY (THOUGH MIXED) EXPORT PERFORMANCE IN THE FIRST
HALF OF THE YEAR:
(D) HONG KONG'S OPEN ECONOMY IS PARTICULARLY SUSCEPTIBLE TO
WORLD-WIDE INFLATION AND, FOR THE PAST 18 MONTHS AND MORE (NOT JUST ''IN RECENT MONTHS''), REAL WAGES HAVE BEEN FALLING, AS THEY MUST, IF OUR EXTERNAL COMPETITIVENESS IS TO BE MAINTAINED. THIS PROCESS MUST CONTINUE FOR SO LONG
AS DEEMAND IN OUR MAJOR MARKETS IS SLACK. THIS FALL IN REAL
WAGES HAS, OF COURSE, CONTRIBUTED TO THE LOWER GROWTH RATE OF THE GDP WE ARE NOW EXPERIENCING:
(E) THE SENTENCE HONG KONG'S FOREIGN EXCHANGE RESERVES ARE
SUBSTANTIAL'' IS NOT UNDERSTOOD. IF THE REFERENCE IS TO THE HONG KONG GOVERNMENT'S OVERSEAS ASSETS, THEN THEY ARE CERTAINLY NOT SUBSTANTIAL FOR THEY MUST BE NETTED DOWN BY LIABILITIES (LARGELY ON ACCOUNT OF THE CURRENCY ISSUE). IF THE REFERENCE IS TO THE BANKS NET OPEN FOREIGN CURRENCY
POSITIONS, THEN TWO POINTS MUST BE MADE: FIRST, THE TOTAL OF THESE POSITIONS HAS REMAINED UNCHANGED SINCE EARLY 1973 AT AROUND DOLLARS 5,000 MILLION (CURRENT RATES OF EXCHANGE). SECONDLY, AT DOLLARS 5,000 MILLION THIS TOTAL CANNOT FAIRLY BE DESCRIBED AS SUBSTANTIAL GIVEN THE RATIO OF VISIBLE OVERSEAS TRADE TO THE GDP (2:1):
(F) PUBLIC EXPENDITURE IS NOT FINANCED FROM A MAXIMUM INCOME
AND CORPORATE TAX RATE OF 15%''. FAR FROM IT. TAXES ON SALARIES, PROFITS, PROPERTY INCOME AND INTEREST CONTRIBUTE ONLY 30% TO TOTAL REVENUE. THE REMAINING 70% IS MADE UP OF:
RATES AND OTHER INDIRECT TAXES
32%
INCOME FROM GOVERNMENT PROPERTY AND INVESTMENTS 18%
FEES AND CHARGES FOR GOODS AND SERVICES
OTHER
14%
6%:
(6) DURING THE NEXT FEW YEARS IT WILL NOT BE POSSIBLE TO
FINANCE THE TRADITIONAL DEFICIT ON CAPITAL ACCOUNT (CAPITAL REVENUE NORMALLY COVERS ONLY 25% OF CAPITAL EXPENNDITURE) BY THE SURPLUS ON RECURRENT ACCOUNT. AS WELL AS SOME TAX CHANGES (WHEN THE ECONOMIC SITUATION PERMITS) WE SHALL HAVE TO HAVE RECOURSE TO BORROWINGS
(H) FOR THIS AND OTHER REASONS (1,E. INSURANCE AGAINST UNFORESEEN FLUCTUATIONS IN REVENUE AND EXPENDITURE) OUR FISCAL RESERVE POSITION IS EXTREMELY IMPORTANT TO US. AT 1ST APRIL 1974 OUR FISCAL RESERVES (1.E. EXCESS OF ASSETS OVER LLIABILITIES ON GENERAL REVENUE ACCOUNT) STOOD AT DOLLARS 2,998 MILLION