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WEDNESDAY, FEBRUARY 25, 1981
BUT LET US NOT FORGET THAT HONG KONG'S EXPERIENCE HAS BEEN MARKEDLY DIFFERENT FROM THAT OF MANY OTHER PLACES WHERE INFLATION HAS BEEN ASSOCIATED WITH SLUGGISH ECONOMIC ACTIVITY AND HIGH UNEMPLOYMENT. SINCE THE RECESSION SIX YEARS AGO, OUR ECONOMY HAS INCREASED IN SIZE BY 70 PER CENT, THE AVERAGE INCOME OF THE POPULATION HAS INCREASED BY AS MUCH AS 50 PER CENT IN REAL TERMS, DESPITE THE FACT THAT OUR POPULATION INCREASED RAPIDLY, AND THE UNEMPLOYMENT RATE HAS BEEN CONSISTENTLY LOW.
IT IS TRUE THAT. IN THE SECOND HALF OF 1980 THERE WAS A SHARP SLOW DOWN IN OUR EXPORT PERFORMANCE AND THE UNEMPLOYMENT RATE INCREASED SOMEWHAT AND THE IMMEDIATE OUTLOOK IS UNCERTAIN. BUT OUR TRADING PROSPECTS IN THE LATTER MONTHS OF 1981 ARE MORE PROMISING AND OUR PROSPERITY IS NOT AS DEPENDENT ON THE EXPORT OF GOODS MANUFACTURED HERE AS IT USED TO BE. SO I THINK OUR ECONOMY SHOULD ACHIEVE QUITE A RESPECTABLE GROWTH RATE IN 1981 OF PERHAPS 8 PER CENT IN REAL TERMS, AGAIN AFTER ALLOWING FOR INFLATION- AND INFLATION SHOULD EASE OFF THIS YEAR ANYWAY, BUT NOT, I REGRET, DRAMATICALLY FOR WE SHALL STILL HAVE TO LIVE WITH IMPORTED INFLATION AND OUR OWN ECONOMY WILL STILL BE FORGING AHEAD.
I WAS ALSO ABLE TO REPORT TO THE LEGISLATIVE COUNCIL THAT OUR PUBLIC FINANCES ARE IN GOOD SHAPE- EVEN AFTER ALLOWING FOR A FURTHER LARGE INVESTMENT IN THE MASS TRANSIT RAILWAY CORPORATION, THE GOVERNMENT'S ACCOUNTS FOR 1980-81 WILL SHOW A SURPLUS OF ABOUT $6 000 MILLION OR TWICE WHAT I BUDGETTED FOR. THIS WAS NOT DUE TO ANY FAILURE TO SPEND IN ACCORDANCE WITH OUR STATED INTENTIONS.
INDEED, EXPENDITURE WILL EXCEED THE ORIGINAL ESTIMATE BY $1 700 MILLION. BUT REVENUE, PARTICULARLY REVENUE FROM EARNINGS AND PROF ITS TAXES, STAMP DUTIES AND LAND SALES ALSO EXCEEDED MY ORIGINAL EXPECTATIONS AND VERY SUBSTANTIALLY.
THE SURPLUS OF $6 000 MILLION WILL BE ADDED TO OUR RESERVES WHICH WILL THEN STAND AT OVER $15 000 MILLION. ABOUT ONE THIRD OF THESE RESERVES HAVE TO BE EARMARKED AS COVER FOR THE LOANS RAISED FOR THE CONSTRUCTION OF THE MASS TRANS IT RAILWAY AND OTHER POSSIBLE LIABILITIES. THE REMAINDER, ABOUT $10 000 MILLION, REPRESENTS OUR ACCUMULATED SAVINGS AND PROVIDES US WITH A VERY NECESSARY DEGREE OF SECURITY AGAINST ANY UNEXPECTED, DECLINE IN REVENUE WE MAY SUFFER, AND ANY UNFORESEEN COMMITMENTS WHICH MAY BE THRUST UPON US. OUR RESERVES COULD ALSO BE USED TO HELP FINANCE ANY PROJECTS WHICH WE MAY EMBARK UPON IN THE 1980S AND WHICH ARE REALLY TOO LARGE TO BE FINANCED FROM CURRENT REVENUE ALONE.
THAT VERY BRIEFLY IS THE ECONOMIC AND FINANCIAL BACKGROUND AGAINST WHICH I PREPARED THE BUDGET: THE ESTIMATES, WHICH MEMEERS OF FINANCE COMMITTEE WILL BE EXAMINING IN DETAIL NEXT WEEK, ENVISAGE EXPENDITURE OF $24 600 MILLION, A 25 PER CENT INCREASE ON EXPENDITURE IN 1980-81.
THIS IS A VERY LARGE INCREASE BUT I THINK OUR ECONOMY CAN JUST ABOUT STAND THE STRAIN. NEARLY TWO THIRDS OF TOTAL EXPENDITURE WILL BE ABSORBED BY THE RECURRENT COSTS OF OUR VAR IOUS SERVICES SUCH AS THE POLICE, OUR HOSPITALS, OUR SCHOOLS, OUR SOCIAL SECURITY SCHEMES AND SO ON AND ONE THIRD WILL BE SPENT ON OUR VAST WORKS PROGRAMMES, INCLUDING HOUSING AND ROADS WHICH WILL, INCIDENTALLY, ACCOUNT FOR NO LESS THAN TWO THIRDS OF CAPITAL EXPENDITURE.
/I EXFACT