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FRUESDAY, APRIL 12, 1979
IN OTHER WORDS, MR. HADDON-CAVE SAID HE DOES NOT REGARD THE SPEED OF THE DECLINE IN RECENT WEEKS AS BEING JUSTIFIED BY THE UNDERLYING-STATE OF OUR ECONOMY,
+FURTHERMORE, GIVEN THE WAY STERLING AND THE U.S. DOLLAR, BOTH OF WHICH ARE HEAVILY WEIGHTED IN THE TRADE-WEIGHTED EXCHANGE RATE INDEX, HAVE BEEN APPRECIATING RATHER UNEXPECTEDLY (AGAINST MOST CURRENCIES), TOO MUCH EMPHASIS MUST NOT BE PLACED ON THE DECLINE IN THE INDEX IN ANY ASSESSMENT OF THE IMPACT OF THE DECLINE IN THE EXCHANGE VALUE OF THE HONG KONG DOLLAR ON OUR ECONOMY.+
MR. HADDON-CAVE EMPHASISED THAT WHAT WAS MORE IMPORTANT FOR SUCH AN ASSESSMENT IS THE RELATIVE MOVEMENTS OF THE IMPORT-WEIGHTED AND EXPORT-WEIGHTED EXCHANGE RATE INDEXES.
BETWEEN THE END OF FEBRUARY AND APRIL 11, THE IMPORT-WEIGHTED INDEX DEPRECIATED MORE SLOWLY AT -3.8 PER CENT THAN THE EXPORT- WEIGHTED INDEX AT -5.3 PER CENT.
+1F THESE TRENDS CONTINUE THE RATES AT WHICH THE PRICES CF IMPORTS INCREASE WILL SLOW DOWN AND HONG KONG'S EXPORT COMPETITIVENESS WILL IMPROVE,+ MR. HADDON-CAVE STRESSED.
THE FINANCIAL SECRETARY SAID THE RATES OF INCREASES ARE CONTINUING TO INCREASE WITH THE COST OF LABOUR AND MATERIALS USED BY THE CONSTRUCTION INDUSTRY INCREASING BY 19 PER CENT IN THE SIX MONTHS ENDING JANUARY 1979 COMPARED WITH 5.7 PER CENT DURING THE SIX MONTHS ENDING JULY 1978.
+THIS IS AN AREA IN WHICH INTERNALLY GENERATED COST INCREASES ARE SIGNIFICANT AND IN WHICH ADJUSTMENTS TO THE GROWTH RATE OF DEMAND BY THE PUBLIC SECTOR CAN EXERT A STRONG INFLUENCE,+ MR. HADDON-CAVE SAID.
ON THE HON. OSWALD CHEUNG'S CLAIM THAT HONG KONG HAD BEEN EXPERIENCING DOUBLE DIGIT INFLATION FOR THE PAST 25 YEARS. MR. HADDON-CAVE SAID SUCH A RATE OF INFLATION +WOULD BE QUITE INCONSISTENT WITH THE IMPRESSIVE PERFORMANCE OF OUR EXTERNALLY ORIENTED ECONOMY, A PERFORMANCE WHICH HAS CLEARLY ILLUSTRATED HOW COMPETITIVE WE HAVE BEEN.+
+ON HIS SPECIFIC POINT ABOUT THE HIGH COST OF LAND AND RENTS, RENTS ARE REFLECTED IN OUR CONSUMER PRICE INDEXES AND IN THE PRICES OF GOODS AND SERVICES PRODUCED IN THE ECONOMY AND HENCE IN THE G.D.P. DEFLATOR,+ MR. HADDON-CAVE STRESSED.
THE FINANCIAL SECRETARY SAID THE OBJECT OF OUR BUDGETARY STRATEGY IS TO SPEED UP AND SMOOTH OUT THE ADJUSTMENT PROCESS, WHEREPY EXCESS DEMAND FOR, OVER THE SUPPLY OF, DOMESTIC RESOURCES IS EL MINATED AND INTERNALLY GENERATED INFLATIONARY PRESSURES ARE REMOVED.+
*! MUST STRESS AT THIS POINT THAT OUR STRATEGY IS NO SUBSTITUTE FOR THE ADJUSTMENT PROCESS. IT IS SIMPLY DESIGNED TO LESSEN THE UNACCEPTABLE CONSEQUENCES OF RELYING ENTIRELY UPON IT.