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Some have expressed doubts about our future prosperity. They worry that the decline in retail spending and in stock and property prices is a signal that the economy is heading for trouble.
But I see no reason to be pessimistic. The economic prospects for our major trading partners are better than they have been for some years. The OECD has forecast that the economies of the United States and the European Union will grow by 3% this year. And then there is the continued growth of the Chinese economy. The growth rate in China this year may not be as dramatic as in previous years but it is still likely to be very high by international standards. All this will increase the demand for our goods and services, particularly our services which are now the backbone of our
economy.
I have taken a realistic approach to our economic prospects. I have not ignored the uncertainties on the horizon or the problems that could affect us. But, at the same time, I have not exaggerated the difficulties. I expect our economy to grow by 5.5% in 1995. What that means in practice is that we can look forward to another year of low unemployment, rising real incomes and higher living standards.
We have seen some progress in the battle against inflation. The measures we introduced last year to deter property speculators helped to reduce residential prices. Higher interest rates have also helped to contain inflation. But, as I have said many times before, we must face the fact that, as long as our economy continues to grow, the pressure on prices will remain. This is why I expect to see little change in inflation in 1995.
Our continued economic growth means that we can afford to make further improvements in the quality of our public services. For example, in the coming financial year, we will increase total public spending on education by 5.5%, on health by 7.7% and on social welfare by 24.1%. These will be real increases, over and above inflation.
These additional funds will allow us to implement the 337 proposals announced in last year's Policy Address, including real increases in social security payments for single parents and children, over 800 new hospital beds and almost 1,500 new places for the elderly in care and attention homes. I have also been able to announce some new initiatives. We will start preparing for the construction of the Duplicate Tsing Yi South Bridge to relieve the traffic congestion on Tsing Yi. We will also be spending about $2.5 billion to buy premises for welfare services which will help us to meet the key targets set by the Governor in his 1992 Policy Address.