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THURSDAY, APRIL 12, 1979
+SO IN SEEKING TO EXERCISE 'CONSTRAINT WITH RESTRAINT', TO QUOTE FROM A NEWSPAPER EDITORIAL, I HAVE TAKEN CARE NOT TO DO TOO MUCH. HOWEVER, I CAN ASSURE HONOURABLE MEMBERS THAT THE GOVERNMENT STANDS READY TO TAKE FURTHER MEASURES IF THESE PROVE NECESSARY,+ MR. HADDON-CAVE STRESSED.
ON OIL PRICE INCREASES. MR. HADDON-CAVE SAID THAT THEY WILL LEAD TO A SHARPER ACCELERATION IN THE RATES OF INCREASE IN THE PRICES OF OIL PRODUCTS IN HONG KONG, OF GOODS WITH A HIGH OIL CONTENT AND OF SERVICES RELYING HEAVILY ON OIL.
+HOWEVER, THE PROPORTION OF HOUSEHOLD EXPENDITURE ACCOUNTED FOR BY 'FUEL AND LIGHT' IN OUR CONSUMER PRICE INDEXES IS ONLY ABOUT THREE PER CENT.
+SO, ALTHOUGH THERE ARE OTHER SERVICES THAT RELY FAIRLY HEAVILY ON OIL, NOTABLY PUBLIC TRANSPORT (WHERE OIL COSTS PRESENTLY REPRESENT BETWEEN SIX AND 17 PER CENT OF TOTAL OPERATING COSTS) THE OVERALL IMPACT OF INCREASES IN OIL PRICES OF THE ORDER OF MAGNITUDE OF THOSE ANNOUNCED RECENTLY IS UNLIKELY TO BE ALL THAT SERIOUS, THE FINANCIAL SECRETARY SAID.
HE ALSO SAID THE DIRECT IMPACT ON, FOR EXAMPLE, MANUFACTURING COSTS WILL ALSO NOT BE PARTICULARLY SIGNIFICANT BECAUSE THE COST OF FUEL AND ELECTRICITY AS A PROPORTION OF TOTAL GROSS OUTPUT WILL ONLY BE AROUND ONE PER CENT - ALTHOUGH SOME OF OUR MANUFACTURERS WILL BE AFFECTED MORE SERIOUSLY THAN THIS PERCENTAGE IMPLIES AND OUR COMPETITORS WILL BE SIMILARLY AFFECTED.
MR. HADDON-CAVE POINTED OUT THAT IT WOULD BE THE INDIRECT EFFECTS WHICH ARE MORE WORRYING.+
FIRST, SHARPER INCREASES IN OIL PRICES AND SHORTAGE OF SUPPLY WILL INEVITABLY HAVE AN UNFAVOURABLE EFFECT ON THE GROWTH RATES OF THE ECONOMIES OF SOME OF OUR MAJOR MARKETS, IN THE SENSE THAT THEY MAKE THE ADOPTION OF REFLATIONARY POLICIES MORE UNLIKELY.
HENCE THE GROWTH RATE OF DEMAND FOR HONG KONG'S EXPORTS MAY BE SLOWER THAN WOULD OTHERWISE BE THE CASE AND COMPETITION FOR BUSINESS WILL BE KEENER.
+GIVEN THE PRESENT STATE OF ORDER BOOKS, THESE INDIRECT EFFECTS WILL TAKE TIME TO WORK THROUGH AND PROBABLY WILL HAVE LITTLE EFFECT ON HONG KONG BEFORE THE END OF 1979- BUT PERHAPS A SHADOW HAS BEEN CAST OVER OUR PROSPECTS IN 1980.+
+SECONDLY,+ MR. HADDON-CAVE SAID, +AS MR. JAMES WU RIGHTLY POINTED OUT, THE PRICES OF SUCH OIL RELATED RAW MATERIALS AS PLASTICS WILL BE AFFECTED AND THE RESULTANT PRESSURE ON THE DOMESTIC COST-PRICE STRUCTURE MAY FURTHER AFFECT THE DEMAND FOR OUR EXPORTS.
+BUT THE LIKELIHOOD IS THAT, IN THE SHORT-TERM AT LEAST THE EFFECT OF INCREASE IN OIL PRICES ON THE VISIBLE TRADE DEFICIT WILL BE OFFSET BY THE REDUCED CONSUMPTION THE SECRETARY FOR ECONOMIC SERVICES HAS SAID IS LIKELY TO BE NECESSARY AS A RESULT OF SHORTAGES IN SUPPLY, MR. HADDON-CAVE SAID.