50
THE ECONOMY
The price of loco-London gold moved between US$300 and US$330 an ounce in lacklustre trading throughout most of 1985. The price of gold on the Chinese Gold and Silver Exchange Society followed similar movements as that for loco-London gold. The tael price of gold fluctuated mostly between $2,800 and $3,100, touching a high of $3,215 on March 20, before ending the year at $3,041.
Inflation
The rate of inflation, as measured by the increase in the Consumer Price Index (A), averaged 3.2 per cent in 1985. This compared very favourably with a rate of 8.1 per cent in 1984 and 10.0 per cent in 1983. During the course of 1985, the year-on-year rate of increase in the Consumer Price Index (A) remained fairly stable, moving mostly within a narrow range of three per cent to four per cent. A number of favourable factors have contributed to the relative stability in consumer prices. Domestically, aggregate demand for resources in the economy was not imposing undue pressure on the aggregate supply of resources, and hence on the general price level. Externally, the Hong Kong dollar was stable against the US dollar under the linked exchange rate system, the rates of inflation in Hong Kong's major trading partners were moderate, and world commodity prices remained generally soft.
Apart from alcoholic drinks and tobacco, the prices for most components of goods and services in the Consumer Price Index (A) showed only moderate changes during 1985. The 12.4 per cent increase in the prices of alcoholic drinks and tobacco largely reflected the increase in the duties on imported cigarettes and tobacco, and on beer and non-European type wines and spirits effected at the end of February 1985.
Expenditure on the General Revenue Account in 1984-5 and 1985-6
In the financial year 1984–5, total expenditure on the General Revenue Account was $36,902 million, comprising recurrent expenditure of $25,992 million and capital expendi- ture of $10,910 million. Estimated expenditure in 1985–6 is $38,362 million, comprising recurrent expenditure of $29,685 million and capital expenditure of $8,677 million. In 1984-5, there was a deficit of $1,563 million (of which $1,004 million was financed by the issue of Government Bonds), and for 1985-6 an overall deficit of $960 million was anticipated in the Budget. Detailed breakdowns of revenue by source are given at Appendices 7 and 7a, and of expenditure by function at Appendices 8 and 8a. A comparative statement of recurrent and capital revenue and expenditure is given at Appendix 9, while a statement of revenue from duties is given at Appendix 10. At March 31, 1985, the accumulated reserves stood at about $15,518 million. At the same date, the public debt amounted to $1,317 million.