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THURSDAY, MARCH 4, 1993
SECOND POINT, YOU REALLY HAVE TO LOOK AT NOT JUST THE OVERALL FIGURES BUT THE COMPOSITION OF THE EXPENDITURE. WE'VE BEEN RATHER CAREFUL TO CHOOSE THE ITEMS WE'RE SPENDING MONEY
ON. THEY'RE MAINLY CAPITAL ITEMS WHICH WILL FRED INTO THE CONSTRUCTION INDUSTRY WHICH IS CURRENTLY UNDER-UTILISED, WHICH IS CURRENTLY PRODUCING TENDERS BELOW WHAT WE WOULD NORMALLY EXPECT THEM то BE. WE'RE FORTUNATE THAT THAT'S THE POSITION, BUT IT IS THE POSITION, SO THAT THE EFFECT OF INJECTING SOME MORE PROJECTS INTO THE CONSTRUCTION INDUSTRY SHOULD NOT BE PARTICULARLY INFLATIONARY, FORTUNATELY FOR US. SECONDLY A NUMBER OF THE PROJECTS THAT WE'VE ANNOUNCED ARE SPREAD OVER A PERIOD OF YEARS, THEY DON'T SUDDENLY GET INJECTED, THE MONEY DOESN'T SUDDENLY GET INJECTED INTO THE ECONOMY. IT MAY GET OUT OF MY ACCOUNTS SUDDENLY BUT IT DOESN'T GET INTO THE ECONOMY SUDDENLY. EXAMPLES OF THAT WOULD BE ROUTE 3, WOULD BE THE EXTENSION TO THE CONVENTION CENTRE, WOULD BE THE NORTH DISTRICT HOSPITAL. THOSE ARE ALL PROJECTS WHICH TAKE A NUMBER OF YEARS. THIRDLY, MOST OF THOSE PROJECTS AND THE NORTH DISTRICT HOSPITAL IS THE ONLY EXCEPTION, DO NOT CARRY WITH THEM A SIGNIFICANT TRAIL OF RECURRENT EXPENDITURE. 1 THINK ONLY THE HOSPITAL OF THOSE MAJOR NEW PROJECTS THAT WE'VE ANNOUNCED, CARRIES WITH IT SOME RECURRENT EXPENDITURE AND WE'RE CONFIDENT THAT THAT CAN BE CONTAINED WITHIN OUR GROWTH GUIDELINES. ANOTHER POINT, WE'RE AN OPEN ECONOMY AND ONE OF THE MERITS OF AN OPEN ECONOMY IS THAT IF YOU GET AN INCREASE IN DEMAND FOR SAY CONSUMER PRODUCTS BECAUSE PEOPLE HAVE SOME WHAT MORE IN THEIR POCKETS BECAUSE OF TAX CONCESSIONS, PART OF THAT WILL BE SAVED, OF COURSE, BUT PART OF IT MAY BE SPENT, THEN IT CAN BE SPENT VERY SIMPLY BY IMPORTING THE PRODUCT. THAT IN ITSELF IS NOT INFLATIONARY. THE PROPORTION THAT'S INFLATIONARY WOULD ONLY BE WHAT THEY SPENT HERE ON, SAY A RESTAURANT. SO WE HAVE A HIGH SAVING HABIT IN HONG KONG, NO DOUBT SOME OF IT HOWEVER WILL BE SPENT AND QUITE A LOT OF THAT WILL SIMPLY GO INTO IMPORTING PRODUCTS WHICH IS NOT IN ITSELF PARTICULARLY INFLATIONARY.
SO IT'S THOSE SORT OF POINTS WHICH REASSURE US THAT THE BUDGET IS NOT INFLATIONARY. I WOULD HAVE TO SAY ALSO OF COURSE IT'S NOT PARTICULARLY DEFLATIONARY. BUDGETS GENERALLLY SPEAKING I SAID DON'T HAVE A SIGNIFICANT EFFECT EITHER WAY. THE MAIN INFLATIONARY PROBLEM WHICH FACES US IS THE SAME ONE THAT WE'RE FAMILIAR WITH, IT'S NOT MUCH TO DO WITH GOVERNMENT TAX POLICIES OR FISCAL POLICIES, IT'S TO DO WITH DEMAND ON A LABOUR SUPPLY AND A LAND SUPPLY WHICH IS IN SHORT, WHICH IS TOO SMALL FOR THE DEMANDS MADE ON IT AND WE HAVE TO MAKE POLITICAL JUDGEMENTS, NOT JUST ECONOMIC JUDGEMENTS ON HOW FAR WE CAN MEET THAT DEMAND. THAT'S A DECISION THAT
HAS THE BE
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HAVING
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TO BE MADE IN A DIALOGUE WITH LEGCO AND THE COMMUNITY, SO THAT'S SITUATION WE'RE IN. HENCE WE'RE FORECASTING THAT INFLATION WILL ROUGHLY THE SAME AS IT IS NOW, TO PUT IT CRUDELY. I MEAN THE PER CENT FORECAST THAT'S IN ESSENCE WHAT IT'S SAYING.
So, TOUCHED ON THOSE TWO POINTS, PERHAPS KY DO YOU WANT TO ELABORATE LITTLE ON THE INFLATION POINT.
/SECRETARY FOR