36
FINANCIAL SYSTEM AND ECONOMY
more in line with the growth rate of the economy's capacity to produce that output, and this led to an easing of the pressure of demand on domestic resources (which in the previous two years was exercising unfavourable influences on domestic prices). This situation was particularly obvious in respect of labour. The unemployment rate rose a little from 2.3 per cent and 3.4 per cent, respectively, in March and September, 1979, to 3.2 per cent and 4.3 per cent, respectively, in March and September, 1980- and the rate of increase in wage rates also slowed down,
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To a significant extent, however, this closer balance between the supply of, and demand for, labour was attributable to the sudden increase in the supply of labour as a result of immigration, rather than to a fall in the demand for labour. Further, as immigrants were generally less skilled than the local labour force, their arrival had differing effects on the labour supply in various sectors of the economy. The manufacturing sector appeared to be most affected. The growth rate of employment was rapid but there was a serious depressing effect on manufacturing wage rates. Between September, 1979, and September, 1980, average daily wage rates in the manufacturing sector increased in real terms by only 0.8 per cent.
The building and construction sector also attracted a large number of immigrants and so the rate of increase in construction wages slowed down as well during the year. Although the supply of skilled labour continued to be limited, with no undue shortage of unskilled labour, there was a closer balance between the supply of, and demand for, construction labour. Coupled with relatively stable prices for construction materials generally, the rate of increase in building and construction costs slowed down considerably. The continuing recruitment of unskilled and inexperienced labour, however, had an adverse effect on the productivity of the building and construction sector. Hopefully, this effect should be short- lived because, in time, there should be an improvement in productivity as the sector's labour force becomes more experienced and skilled unless the demand for the sector's output continues to grow so fast that the absorption of new, unskilled, workers has to continue.
Property Market
Closely related to the building and construction industry is the properly market. The overheating, which characterised the property market generally (and residential accom- modation in particular) in 1979, eased considerably in early 1980. This was partly because demand was being temporarily curtailed or postponed, and partly because of the high level of supply that had been achieved. In the early part of the year, resale prices for some residential units were, in fact, somewhat below the levels they had reached at the end of 1979. However, there was a resurgence of buying and selling activities in the residential property market in the middle of the year as the strong underlying demand for residential accommodation re-emerged, stimulated in part by reductions in mortgage interest rates.
Commercial and industrial property prices continued to increase fairly rapidly in 1980 because of generally keen demand, including some speculative demand for commercial property financed by inflows of funds from parts of Southeast Asia, and because of a persistent discrepancy between the supply of, and demand for, particular types of property in particular locations.
Rentals for commercial and industrial property, in general, continued to rise in 1980, while those for residential accommodation (other than for new lettings), were stabilised, mainly because of the extension of rent control to practically all residential units. The