THURSDAY, APRIL 12, 1979
→BUT AS 17 UNOFFICIAL MEMBERS (OUT OF 19 WHO SPOKE IN THE DEBATE) HAVE EXPRESSED THEIR INTENTION TO SUPPORT THE MOTION, I CAN ONLY ASSUME THAT THEY AT LEAST HAVE TAKEN A GENERALLY FAVOURABLE VIEW OF THE DRAFT ESTIMATES AS A WHOLE,+ MR. HADDON-CAVE SAID.
+1 ALSO ASSUME THAT THEY SUPPORT A SLOWING DOWN OF THE GROWTH RATE OF EXPENDITURE ON GENERAL REVENUE ACCOUNT, IN REAL TERMS FROM 25 PER CENT IN 1978-79 TO FIVE PER CENT IN 1979-80, HE ADDED.
THE FINANCIAL SECRETARY ALSO SAID THAT IF PRICES TENDED TO INCREASE FASTER THAN FORECAST DURING THE YEAR, THE GOVERNMENT INTENDS TO APPLY CASH LIMITS STRICTLY AND REDUCE THE GROWTH RATE OF EXPENDITURE, IN REAL TERMS, TO BELOW FIVE PER CENT.
HOWEVER, HIGHER THAN EXPECTED PRICES WOULD BE REFLECTED IN HIGHER REVENUE YIELDS AND THUS AN AUTOMATIC SURPLUS, OVER AND ABOVE THE SURPLUS I HAVE ACTUALLY BUDGETTED FOR, SHOULD BE THE OUTCOME.+
MR. HADDON-CAVE SAID WHEN THIS HAPPENS THE ENACTMENT OF THE EXCHANGE FUND (AMENDMENT) BILL WOULD ENSURE THAT SUCH A SURPLUS WOULD HAVE A CONSTRAINING EFFECT ON THE PRIVATE SECTOR COMPONENT OF DOMESTIC DEMAND.
WHILE SYMPATHISING WITH UNOFFICIAL MEMBERS' CONCERN OF THE COST TO THE MANUFACTURING SECTOR OF BANK FINANCE AT CURRENT INTEREST RATES, MR. HADDON-CAVE STRESSED THAT THE INTEREST RATE MECHANISM WAS AN ESSENTIAL INSTRUMENT TO BRING THE GROWTH RATE OF TOTAL FINAL DEMAND INTO LINE WITH THE GROWTH RATE OF THE ECONOMY'S OUTPUT TO CHECK THE TENDENCY FOR THE VISIBLE TRADE DEFICIT TO WIDEN AND SO TO REDUCE INFLATIONARY PRESSURES.
BUT THE FINANCIAL SECRETARY WAS NOT IN FAVOUR OF INTRODUCING +ADDITIONAL STATUTORY POWERS+ FOR THE EXCHANGE FUND TO INFLUENCE DIRECTLY THE FIXING OF INTEREST RATES AS SUGGESTED BY THE HON. LI FOOK-WO.
THIS WOULD CREATE THE GOVERNMENT DEBT AND WOULD NOT BE IN THE PUBLIC INTEREST, MR. HADDON-CAVE POINTED OUT.
THE DEBT COULD BE CREATED BY, FOR EXAMPLE, THE EXCHANGE FUND ACQUIRING ALL THE FOREIGN CURRENCY ASSETS OF THE BANKING SYSTEM, AND ACCEPTING THE EXCHANGE RISK. MR. HADDON-CAVE REMINDED THE COUNCIL THIS WOULD NECESSITATE THE INTRODUCTION OF A SYSTEM OF EXCHANGE CONTROL.
ON THE SUGGESTION BY THE HON. HILTON CHEONG-LEEN THE RESOURCES OF THE EXCHANGE FUND SHOULD BE DIRECTLY INVESTED IN SELECTED INDUSTRIES, MR. HADDON-CAVE SAID THAT THE PURPOSE OF THE FUND WAS TO REGULATE THE EXCHANGE VALUE OF THE HONG KONG DOLLAR.