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WEDNESDAY, MARCH 6, 1991
HE EXPLAINED THAT THE UNDERLYING REASONS WERE: "FIRST, THE ECONOMY HAS BEEN BUOYANT FOR A NUMBER OF YEARS. THE LABOUR MARKET HAS TIGHTENED AND THE PRESSURE ON WAGES HAS INCREASED AS THE DEMAND FOR LABOUR RESOURCES HAS EXCEEDED SUPPLY. UNFORTUNATELY, INFLATIONARY PRESSURES HAVE PERSISTED EVEN THOUGH THE RATE OF ECONOMIC GROWTH HAS NOW SLOWED DOWN CONSIDERABLY.
"SECONDLY, AND MORE RECENTLY, THE INFLATION RATE HAS BEEN AFFECTED BY INCREASES IN OIL PRICES, HE SAID.
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SIR PIERS SAID: "ALTHOUGH INFLATION REMAINS HIGH, OUR ECONOMY IS STILL FUNDAMENTALLY SOUND.
**WITH THE UNEMPLOYMENT RATE RETURNING TO AN HISTORICALLY LOW LEVEL IN RECENT MONTHS, JOB OPPORTUNITIES ARE ABUNDANT.
"FURTHERMORE, IN RECENT YEARS THE TIGHT LABOUR MARKET HAS HELPED TO BRING ABOUT A STRUCTURAL CHANGE IN THE ECONOMY. WITH A RELOCATION OF THE MORE LABOUR-INTENSIVE MANUFACTURING PROCESSES ΤΟ GUANGDONG AND ELSEWHERE, OUR OWN WORKERS HAVE OFTEN BEEN ABLE TO MOVE TO MORE REWARDING JOBS IN BOTH THE MANUFACTURING AND NON-MANUFACTURING SECTORS," THE FINANCIAL SECRETARY SAID.
HE POINTED OUT THAT THERE HAD ALSO BEEN SUBSTANTIAL INVESTMENT IN NEW MACHINERY AND EQUIPMENT, WHICH IN TURN HAD RAISED PRODUCTIVITY.
"AS FAR AS THE IMPACT ON THE LABOUR FORCE IS CONCERNED,
**
EARNINGS HAVE BEEN MOVING AHEAD OF INFLATION AND MEMBERS OF THE COMMUNITY IN GENERAL HAVE ENJOYED A HIGHER STANDARD OF LIVING, HE SAID.
THEM
HOWEVER, HE CAUTIONED THAT EXCESSIVE PAY INCREASES CARRIED WITH AN INFLATIONARY PENALTY AND THIS APPLIED TO BOTH THE PUBLIC AND
PRIVATE SECTORS.
TT
"OVER TIME HIGH INFLATION CAN EAT INTO SAVINGS AND ERODE THE WEALTH OF THE COMMUNITY. AND SO WE HAVE TO ASK OURSELVES WHAT REMEDIES THERE ARE, HE SAID.
THE
ON THE ARGUMENT BY SOME FOR DIRECT INTERVENTION BY GOVERNMENT ΤΟ CONTROL INFLATION, SIR PIERS SAID THAT WAS NOT THE SOLUTION.
"HONG KONG MUST BE ABLE TO ADJUST EFFECTIVELY ΤΟ CHANGING ECONOMIC CONDITIONS.
"ANY MEASURES WHICH TEND TO REDUCE THE FLEXIBILITY OF THAT ADJUSTMENT WILL NOT BE CONDUCIVE TO OUR WELL-BEING IN THE LONGER TERM.
"THE ARTIFICIAL SUPPRESSION OF PRICE INCREASES WOULD NOT WORK IN HONG KONG. IT WOULD HAMPER THE FLEXIBILITY OF OUR PRICE STRUCTURE, DISTORT THE ALLOCATION OF RESOURCES AND EXACERBATE SHORTAGES.
"IF WE ARE TO MAINTAIN OUR FREE AND OPEN ECONOMY, WE MUST NOT TAMPER WITH THE PRICE MECHANISM, HE SAID.
"
/WHILE CONCEDING
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