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WEDNESDAY, MARCH 26, 1986
SHE SAID THAT WE OUGHT TO BE CONCERNED TO SEE THAT THE GROWTH RATE OF CONSOLIDATED ACCOUNT EXPENDITURE HAD STARTED CLIMBING AGAIN SINCE 1984-85 AND THAT THE FORECAST RISE IN THE CONSUMER PRICE INDEX (A) FOR 1986 AT 5 PER CENT WAS HIGHER THAN THE INCREASE IN 1985.
+ THE LATTER IS ALSO HIGHER THAN THE AVERAGE FORECAST FOR THE OECD, WHICH INCLUDES ALL OUR MAJOR MARKETS EXCEPT CHINA, AND, IN PARTICULAR, IT IS HIGHER THAN THE FORECAST FOR OUR PRINCIPAL MARKET FOR DOMESTIC EXPORTS.
+WHEN THE US STILL TAKES, AS IT DID IN 1985, 44 PER CENT BY VALUE OF OUR DOMESTIC EXPORTS, WE CANNOT BE COMPLACENT ABOUT AN INFLATION FORECAST IN HONG KONG OF 5 PER CENT, WHEN AMERICA'S IS ONLY 3.3 PER CENT, SHE SAID.
TURNING TO THE SPECIFIC BUDGET ASSUMPTIONS OF THE FORECAST, SHE SUGGESTED THE GUIDELINES SHOULD BE NOT TO LET THE GROWTH IN PUBLIC EXPENDITURE EXCEED THAT OF GDP AND THAT WE MUST GO FOR BUDGET SURPLUSES IF WE ARE TO HAVE ADEQUATE RESERVES. IT WAS NOT ENOUGH TO HAVE A CASH FLOW BALANCE, SHE STRESSED.
+ IF WE ARE TO ADD TO HONG KONG'S RESERVES IN ORDER TO MAINTAIN THEIR REAL VALUE, THAT OPERATING SURPLUS MUST BE BIG ENOUGH TO ENSURE THAT WE HAVE AN OVERALL CASH FLOW SURPLUS SINCE CAPITAL REVENUE IS NOT EXPECTED TO BE SUFFICIENT TO MEET CAPITAL EXPENDITURE.
+ALTERNATIVELY, WE WOULD HAVE TO SCALE DOWN OUR FORECAST OF CAPITAL EXPENDITURE,+ SHE SAID.
HOWEVER, SHE NOTED THAT THE FIVE-YEAR FORECAST ANTICIPATED THAT WE WOULD FAIL TO ACHIEVE THIS AS THE CONSOLIDATED EXPENDITURE WAS FORECAST TO RISE BY 42 PER CENT DURING THE PERIOD WHILE THE RESERVE BALANCES BY 2,28 PER CENT ONLY.
IT WAS CLEAR THAT THE CURRENT FIVE-YEAR FORECAST INDICATED THAT THE TREND IN RESPECT OF INFLATION, PUBLIC SECTOR EXPENDITURE AND THE STATE OF OUR RESERVES REQUIRED CAREFUL EXAMINATION AND DEBATE, MISS DUNN SAID.
ON THE SIZE OF THE PUBLIC SECTOR, MISS DUNN REITERATED HER CONCERN ABOUT THE RELATIONSHIP BETWEEN THE SIZE OF THE PUBLIC SECTOR AND THE GDP AND THE NEED FOR A MORE ACCURATE DEFINITION OF THE PUBLIC SECTOR.
SHE MAINTAINED THAT IT WAS NOT JUST AN ARID STATISTICAL RELATIONSHIP BUT WAS FUNDAMENTAL FOR THE HEALTHY GROWTH OF OUR ECONOMY,
+ IF THE PUBLIC SECTOR IS ALLOWED TO PRE-EMPT A GROWING SHARE OF THE ECONOMY, THIS MEANS THAT RESOURCES OF ALL KINDS ARE BEING DRAWN AWAY FROM THE WEALTH-CREATING ECONOMIC ACTIVITY.
/+AND IT