FRIDAY, SEPTEMBER 19, 1980
INFLATIONARY IMPACT CONSIDERED IN POLICY DECISIONS
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THERE ARE LIMITATIONS ON THE SCOPE FOR DIRECTLY CONTROLLING INFLATION IN HONG KONG, BUT THAT DOES NOT MEAN THAT THE GOVERNMENT SHOULD REMAIN ENTIRELY PASSIVE TO RESTRAINING INFLATION.
THE FINANCIAL SECRETARY, SIR PHILIP HADDON-CAVE, MADE THIS OBSERVATION TODAY IN A PAPER HE PRESENTED AT THE LIVING WITH INFLATION+ SEMINAR ORGANISED BY THE HONG KONG MANAGEMENT ASSOCIATION.
+THE GOVERNMENT, IN FACT, ALWAYS CONSIDERS THE POSSIBLE INFLATIONARY IMPACT OF ITS POLICY DECISIONS, PARTICULARLY THOSE INVOLVING EXPENDITURE AND, OVER TIME, HAS TRIED TO ENSURE THAT THE RELATIVE SIZE OF THE PUBLIC SECTOR HAS BEEN CONSISTENT WITH THE ECONOMY'S CAPABILITY, HE SAID.
+ INDEED, I WOULD ARGUE THAT THERE HAS BEEN AN ANTI-INFLATIONARY ELEMENT IMPLIED OR EXPLICIT, IN VARIOUS POLICY DECISIONS TAKEN BY THE GOVERNMENT IN RECENT YEARS, HE ADDED.
SIR PHILIP CAUTIONED, HOWEVER, AGAINST ANY ANTI-INFLATIONARY ACTION BY GOVERNMENT WHICH WOULD INVOLVE ABANDONING, EVEN IN PART, HONG KONG'S COMMITMENT TO FREE TRADE AND TO THE FREE FLOW OF EXCHANGE FUNDS. THIS WOULD SEVERELY DAMAGE THE GROWTH RATE OF THE ECONOMY AND SIMPLY COULD NOT BE CONTEMPLATED.
*LIKEWISE, I CAN SEE NO SCOPE FOR REMEDIAL ACTION AGAINST INFLATION WHICH INVOLVES ANY FORM OF PRICE CONTROL OR SUBSIDY IN RELATION TO THE PRICES OF IMPORTS AND EXPORTS, FOR THE COST OF SUCH ACTION WOULD BE REFLECTED IN LOWER REAL INCOME IN HONG KONG,+ HE SAID.
EVEN IF SUCH MEASURES WERE GATT-ABLE, HE ADDED, THEY MIGHT WELL RESULT IN RETALIATORY ACTION BEING TAKEN AGAINST HONG KONG.
SIR PHILIP CONTINUED THAT THE GOVERNMENT DID TAKE STEPS TO RESTRAIN INFLATION THROUGH POLICY DECISIONS IN BUDGETARY STRATEGY AND DEMAND AND SUPPLY CONSIDERATIONS.
INFLATION IN HONG KONG, HE SAID, HAD USUALLY BEEN EXTERNALLY GENERATED AND ASSOCIATED WITH PERIODS OF SUSTAINED ECONOMIC GROWTH AND RELATIVELY LOW UNEMPLOYMENT RATES.
+MUCH OF THE INTERNALLY GENERATED INFLATION EXPERIENCED IN HONG KONG CAN BE TRACED TO THE STRAINS ARISING FROM, AND THE SHIFTS IN RELATIVE PRICES NECESSITATED BY, A RAPID GROWTH RATE OF THE ECONOMY, + SIR PHILIP CONTINUED.
HE SAID THE RAPID GROWTH DID NOT AFFECT ALL SECTORS OF THE ECONOMY EQUALLY AND THAT THE BENEFITS OF GROWTH CONSEQUENTLY WERE NOT EVENLY DISTRIBUTED.
+BUT AN AVERAGE ANNUAL GROWTH RATE OF PER CAPITA GDP IN REAL TERMS OF 6.4 PER CENT, WHICH WAS WHAT WE ACHIEVED IN THE 1970'S, MUST HAVE RESULTED IN A SUBSTANTIAL IMPROVEMENT IN THE AVERAGE STANDARD OF LIVING FOR OUR PEOPLE, SIR PHILIP SAID IN CONCLUSION.
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