WEDNESDAY, MAY 29, 1991
4
GOVT'S BUDGETARY AND MONETARY SYSTEMS NOT INFLATIONARY
THE
GOVERNMENT'S BUDGETARY AND MONETARY SYSTEMS ARE NOT INHERENTLY INFLATIONARY, THE FINANCIAL SECRETARY, THE HON SIR PIERS JACOBS, SAID THIS (WEDNESDAY) EVENING IN THE LEGISLATIVE COUNCIL.
SIR PIERS WAS RESPONDING TO CRITICISMS THAT THE SYSTEMS WERE INHERENTLY INFLATIONARY WHEN WINDING UP THE MOTION DEBATE ON INFLATION.
IN FACT, HE SAID, IN NATIONAL ACCOUNT AND RESOURCE CONSUMPTION TERMS, THE PUBLIC SECTOR AS A WHOLE REPRESENTED ONLY ABOUT 12 PER CENT OF THE GROSS DOMESTIC PRODUCT.
IN TERMS OF CONSOLIDATED PUBLIC SECTOR EXPENDITURE, THE CORRESPONDING
16.6 RATIO WAS ABOUT 19.3 PER CENT IN 1991-92, UP FROM PER CENT IN 1987-88, NOT FROM 11 PER CENT AS SOME LEGISLATORS MIGHT HAVE SUGGESTED.
HAD
MOREOVER, FOR A NUMBER OF YEARS THE GOVERNMENT HAD ACHIEVED FISCAL SURPLUSES, AND FOR THIS FINANCIAL YEAR, SIR PIERS SAID HE AGAIN BUDGETTED FOR A SURPLUS, ALBEIT A RELATIVELY SMALL ONE.
"IT IS IMPORTANT TO NOTE THAT A FISCAL SURPLUS REPRESENTS A NET WITHDRAWAL OF PURCHASING POWER FROM THE ECONOMY.
"OUR BUDGETARY STRATEGY AND GUIDELINES ARE GEARED TO EXERCISING TIGHT CONTROLS ON ALL ASPECTS OF THE PUBLIC FINANCES, HE SAID.
11
THE EFFECT OF ANY INCREASES IN INDIRECT TAXATION,
WAS ESSENTIALLY ONE-OFF.
HE ARGUED,
"OVERALL, THE IMPACT OF THE BUDGETS IN RECENT YEARS HAS NOT BEEN INFLATIONARY, SIR PIERS STRESSED.
+
THE
ON THE MONETARY SIDE, THE FINANCIAL SECRETARY SAID DURING LATTER PART OF LAST YEAR THE U.S. DOLLAR DEPRECIATED CONSIDERABLY, RESULTING IN FASTER INCREASES IN THE PRICES OF HONG KONG'S IMPORTS TOWARDS THE END OF THE YEAR.
IN RECENT MONTHS, THE U.S. DOLLAR HAD RECOVERED MOST OF THE LOST GROUND, AND THIS WOULD HELP TO STABILISE IMPORT PRICES, SIR PIERS SAID.
"AS A MATTER OF FACT, SINCE THE HONG KONG DOLLAR WAS FIRST OF THE LINKED TO THE U.S. DOLLAR IN OCTOBER 1983, THE EXCHANGE RATE HONG KONG DOLLAR HAS APPRECIATED BY NEARLY 13 PER CENT ON A TRADE- WEIGHTED BASIS, HE SAID.
HE SAID THIS APPRECIATION COULD HARDLY BE CONSTRUED AS HAVING ADDED TO THE INFLATIONARY PRESSURES.
"LET ME STRESS THAT THE CURRENT INFLATION GIVES NO REASON WHATSOEVER FOR MODIFYING
OR OUR LINKED EXCHANGE RATE SYSTEM
THE
PRESENT RATE, HE SAID.
"I
/ON SUGGESTIONS