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for labour, money wages stopped rising and imports declined as rapidly as exports. So the automatic deftion of the economy maintained the balance of payments and it also produced a rapid decelleration of price inflation, from some 18% in 1973 to 14% in 1974 as a whole, and probably no more than 2% this year. Now the economy is beginning slowly to pick up again, its competitive position has improved and Hong Kong's exports are starting to rise again from the low point reached earlier this year.
12.
Of course, this has not happened without a degree of trauma for the economy and the public finances. Hong Kong had been used to an average rate of growth of the economy of some 6 to 8% per annum in real terms. In 1974 we had zero growth and, at the best, 1975 will also be flat. So the revenue has not been growing for two years at existing tax rates. Yet we have managed to increase expenditure, first by moving from a budget surplus in 1972/3 to deficits. in 1974/5 and in the current financial year and, secondly, by some increase in tax rates. Indeed, capital expenditure on such things as public housing, schools and hospitals, as well as expenditure on social welfare, has actually increased through the recession, although severe economies have had to be exercised on other recurrent expenditure.
13.
The fact is that, by the standards of this part of the world, Hong Kong is far in advance of other countries in the provision of publicly financed services for its people. For instance, 40% of the population live in public housing, no-one need go without essential hospital and other medical services because he or she is too poor, free primary education is available for all children and subsidised secondary education for many and social welfare payments are made to the needy. In addition, considerable expenditure is made on essential capital works, such as roads and water