XN000022-1974-03-27 — Page 8

6

Wednesday, March 27, 1974

He noted that the exceptionally bad weather in the third

quarter of 1973 had also played a significant role in pushing up

prices of marine fish and. fresh vegetables, but this was followed

by a sharp decline in prices in the next quarter.

The Financial Secretary did not deny the possibility of

internal inflation playing a role in the latter months of 1972 and

early 1973, but he did not believe that internally generated inflation

was now significantly aggravating the situation.

Mr. Haddon Cave disputed suggestions by unofficial members

that some of his budget revenue proposals were inflationary.

He stressed that Hong Kong's tax system is non-inflationary and

that his 1972 and 1973 revenue proposals were designed to relieve the

cost-price system of tax levies which could be reckoned to be inflationary.

"It should also be remembered at this point that our budgetary

policy eschews deficit financing through government bond issues which

are taken up by banks and accepted as eligible liquid assets."

17

Page &