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SO TO EARMARK DOLLARS 2,500 MILLION WITHIN OUR FISCAL RESERVES
IMPLIES A GEARING OF THREE. A HIGHER GEARING THAN THIS WOULD NOT
BE PRUDENT, EVEN THOUGH THE NATURE OF MANY OF OUR CONTINGENT
LIABILITIES IS SUCH THAT WE ARE MOST UNLIKELY EVER TO BE CALLED
UPON TO MEET THEM
107. THAT LEAVES DOLLARS 1,160 MILLION OUT OF OUR FISCAL RESERVES AT 1ST APRIL 1977 FOR SHORT TERM DIFFICULTIES AND TO FINANCE OUR SEASONAL DEFICITS. THIS IS THE EQUIVALENT OF NEARLY 15% OF ESTIMATED EXPENDITURE NEXT YEAR AND THIS IS THE SORT OF RELATIONSHIP WHICH WE SHOULD MAINTAIN. IT FOLLOWS THAT, TO THE EXTENT THAT EXPENDITURE INCREASES YEAR BY YEAR, OUR RESERVES SHOULD BE AUGMENTED.
108. AT THE SAME TIME, I MUST BEAR IN MIND THE MONETARY
CONSEQUENCES OF THE WAY IN WHICH OUR FISCAL RESERVES ARE RUN DOWN
OR ADDED TO BECAUSE, AS I EXPLAINED EARLIER, THE DISPOSITION OF
CUR RESERVES BETWEEN FOREIGN CURRENCY AND HONG KONG DOLLARS ASSETS
HAS CONSEQUENCES FOR THE MONEY SUPPLY WHEN THE EXCHANGE RATE IS
NOT FIXED.
109. IT WAS THESE VARIOUS GUIDELINES WHICH I BORE IN MIND WHEN
CONSTRUCTING THE BUDGET FOR 1977-78. IT REMAINS TO BE SEEN HOW
CLOSELY I WAS ABLE TO OBSERVE THEM OR, FOR THAT MATTER, FELT IT NECESSARY TO DO SO. AT THE OUTSET, OF COURSE, I HAD TO TAKE A
VIEW OF THE TWO PERMISSIVE GUIDELINES DESIGNED TO ENSURE STEADY
PROGRESS. I DECIDED THAT, IN THE COMING YEAR, WE SHOULD SEEK A REAL GROWTH RATE, NOT OF 10%, BUT OF THE ORDER OF 15% SO AS TO
MAKE UP FOR THE FACT THAT WE WERE BELOW THIS GUIDELINE IN 1976-77 (+8%) AND 1975-76 (+18 ONLY). I DECIDED ALSO THAT THERE WAS NO NEED
TO AUGMENT OUR FISCAL RESERVES BY DELIBERATELY BUDGETTING FOR A
SURPLUS,
225.
TURNING FINALLY TO THE ECONOMIC IMPLICATIIONS OF THE BUDGET:
AS I HAVE ALREADY MENTIONED THE LIKELY EFFECTS OF THE DEMANDS
BY THE PUBLIC AND PRIVATE SECTORS ON THE CONSTRUCTION INDUSTRY (234),
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