WEDNESDAY, FEBRUARY 28, 1979
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F.S. STRESSES NEED FOR COOLING DOWN OVERHEATED ECONOMY
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THE FINANCIAL SECRETARY, MR. PHILIP HADDON-CAVE, TODAY (WEDNESDAY) EXPRESSED CONCERN ABOUT THE EXCESSIVE DOMESTIC DEMAND AND STRESSED THE NEED FOR COOLING DOWN THE OVERHEATED ECONOMY.
ANALYSING THE ECONOMY AND THE PUBLIC SECTOR IN THE LEGISLATIVE COUNCIL, MR. HADDON-CAVE SAIDS +CLEARLY, THE ECONOMY CANNOT BE ALLOWED TO DEVELOP THIS WAY IN 1979. IF THE PRESENT PATTERN AND THE GROWTH RATE OF DEMAND IS ALLOWED TO CONTINUE TO DISTORT THE STRUCTURE OF THE ECONOMY, BOTH THE MAGNITUDE AND THE DURATION OF THE SUBSEQUENT ADJUSTMENT IS LIKELY TO BE VERY PAINFUL IN TERMS OF ITS CONSEQUENCES FOR INDIVIDUALS.
+AND BEFORE THIS ADJUSTMENT TAKES PLACE, CONTINUING INFLATION WILL ERODE THE REAL INCOMES OF MANY GROUPS WITHIN THE COMMUNITY.+
HE OUTLINED THREE BASIC STEPS TO DAMPEN THE ECONOMY SO AS TO FACILITATE A RELATIVE SHIFT IN FAVOUR OF EXPORTS AND TO PEG THE GROSS DOMESTIC PRODUCT (TOTAL OUTPUT OF GOODS AND SERVICES) AT SEVEN PER CENT FOR THE NEXT FINANCIAL YEAR.
THE FIRST IS TO SLOW DOWN THE GROWTH RATE OF GOVERNMENT EXPENDITURE WITHOUT AFFECTING COMMITMENTS TO MAJOR SOCIAL SERVICES PROGRAMMES - SECOND, TO ARRANGE THE SLOW-DOWN IN THE GROWTH RATE OF GOVERNMENT EXPENDITURE IN SUCH A WAY AS TO MINIMISE THE DISTORTIONS WITHIN INDIVIDUAL MARKETS (E.G. THE MARKET FOR THE OUTPUT OF THE BUILDING AND CONSTRUCTION INDUSTRY) AND THIRD, TO CONSTRAIN THE GROWTH RATE OF PRIVATE DOMESTIC DEMAND BY REDUCING THE GROWTH RATE OF THE MONEY SUPPLY IN THE HANDS OF THE NON-BANK PRIVATE SECTOR.
THE FINANCIAL SECRETARY PROPOSED TO CUT THE GROWTH RATE OF GOVERNMENT CONSUMPTION EXPENDITURE ON THE GROSS DOMESTIC PRODUCT BY FIVE PERCENTAGE POINTS TO NINE PER CENT AND GOVERNMENT EXPENDITURE ON BUILDING AND CONSTRUCTION BY 26 PERCENTAGE POINTS TO FOUR PER CENT COMPARED WITH THE GROWTH RATES USED IN THE INITIAL FORECAST.
IN SPITE OF THESE CUTS, THE HOUSING PROGRAMME, AND OTHER COMMITMENTS TO SOCIAL SECURITY AND EDUCATION WHITE PAPERS WILL BE CARRIED OUT. OTHER CAPITAL PROJECTS WOULD HAVE TO BE REPHASED.
MR. HADDON-CAVE SAID, HOWEVER, THAT THE REDUCTIONS IN THE GROWTH RATES OF THE VARIOUS COMPONENTS IN THE GDP IN THE FINAL FORECAST COMPARED WITH THE INITIAL FORECAST, ARISE AS A RESULT OF THE SLOWER GROWTH RATE OF GOVERNMENT EXPENDITURE.
HE PREDICTED THAT PRIVATE CONSUMPTION EXPENDITURE GROWTH RATE WOULD BE HELD AT NINE PER CENT COMPARED WITH 10 PER CENT IN THE INITIAL FORECAST- THE FINAL FORECAST FOR THE GROWTH RATE OF GROSS DOMESTIC FIXED CAPITAL FORMATION WILL BE NINE PER CENT COMPARED WITH 13 PER CENT IN THE INITIAL FORECAST OVERALL EXPORTS IS EXPECTED TO BE EIGHT PER CENT COMPARED WITH 14 PER CENT IN 1978 BUT THIS INVOLVES NO CHANGE FROM THE INITIAL FORECAST- AND IMPORTS' GROWTH RATE WILL BE 10 PER WITH 11 PER CENT IN THE INITIAL FORECAST.
CENT COMPARED
/+AFTER MAKING ....