WEDNESDAY, APRIL 23, 1986
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BUT HE ADDED: +IT IS NEVERTHELESS FAR TOO EARLY TO CONTEMPLATE REVISING EITHER OF THESE FORECASTS OR THAT FOR THE GDP. THEY STAND UNCHANGED.+
SIR JOHN SAID THE RATE OF INFLATION AT PRESENT WAS AROUND THREE PER CENT, WHICH MADE HIS FORECAST OF FIVE PER CENT ON AVERAGE FOR 1986 SEEM HIGH. IT ALLOWED, HOWEVER,
IT ALLOWED, HOWEVER, FOR SOME FURTHER DEPRECIATION OF THE HONG KONG DOLLAR AGAINST OTHER MAJOR CURRENCIES DURING THE YEAR, WHICH MIGHT OR MIGHT NOT OCCUR.
+DESPITE THE UNFAVOURABLE CONSEQUENCES FOR INFLATION, THE DEPRECIATION OF THE HONG KONG DOLLAR HAS BEEN USEFUL IN RESTORING
ALTHOUGH HONG KONG IS NOT A THE COMPETITIVENESS OF OUR EXPORTS.
MAJOR IMPORTER OF OIL OR OIL PRODUCTS, THE FALL IN OIL (AND COAL) PRICES HAS BEEN A FAVOURABLE FACTOR AS FAR AS INFLATION IS CONCERNED AND MAY WELL RESULT IN AN OUTCOME LOWER THAN MY FORECAST OF FIVE PER CENT.+
TURNING TO OTHER MATTERS, SIR JOHN REFERRED TO COMMENTS ABOUT TRANSFERS TO AND FROM FUNDS. THOSE TRANSFERRED IN THE LAST FINANCIAL YEAR ARGUABLY REFLECTED ONE-OFF TREATMENT AS CAPITAL OF WINDFALL EXTRAORDINARY LAND REVENUES. WHILE THE $800 MILLION TRANSFER FROM THE HOME OWNERSHIP FUND IN THIS FINANCIAL YEAR REPRESENTED THE OUTCOME OF GOOD MANAGEMENT.
HE SPOKE OF A NEED TO MAINTAIN AND INDEED INCREASE THE REAL VALUE OF BUDGET SURPLUSES AND THUS THE FUNDS.
+IN SMOOTHING GOOD WITH BAD YEARS A SURPLUS OF ABOUT $1 WE CLEARLY HAVE MADE A BILLION ANNUALLY SHOULD BE AIMED AT. GOOD START.+
SIR JOHN DESCRIBED THE EXCHANGE FUND AS +VERY LARGE, VERY SAFE AND VERY LIQUID+. HE SAID THE EQUITY HOLDINGS IN HONG KONG AROSE ONLY FROM TRANSFER AT ARM'S LENGTH FROM THE FINANCIAL SECRETARY INCORPORATED IN 1982-83 AS HE SCRAPED THE BARREL IN AN EFFORT TO FIND DESPERATELY NEEDED GENERAL REVENUE. THERE WAS ALSO THE SIGNIFICANT HOLDING OF 20 PER CENT OF CABLE AND WIRELESS (HK) LIMITED, WHICH WAS WORTH FAR MORE THAN WAS FIRST PAID FOR IT.
+A STUDY HAS FOR SOME TIME BEEN UNDERWAY ON THE DISPOSAL OF SOME OR ALL OF THESE HOLDINGS. THEY ARE ARGUABLY NOT APPROPRIATE TO THE EXCHANGE FUND, THOUGH SOME DIFFICULT ASPECTS OF POLICY ARE CLEARLY INVOLVED.+
OVERALL, SIR JOHN SAID, FEW MEMBERS DID NOT ACCEPT THE PARAMOUNT NEED TO CREATE WEALTH BEFORE DIVIDING IT. +ALL SEE THE PURPOSE OF PUTTING HONG KONG'S FINANCES BACK INTO A STATE OF EQUILIBRIUM, BACKED BY APPROPRIATE RESERVES. MOST ACCEPT THE IMPERATIVES OF LOW TAXATION AND ESPECIALLY LOW DIRECT TAXATION.+
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