XN000022-1974-10-16 — Page 15

13

►

WEDNESDAY, OCTOBER 16, 1974

FURTHERMORE, SIR MURRAY SAID CONSUMER PRICES, IN THE AUTUMN OF 1973. WERE ALREADY SHOWING SIGNS OF LEVELLING-OFF CAND EVEN FALLING IN SOME INSTANCES) AND SO AT THAT TIME THERE WAS EVERY REASON TO EXPECT A FURTHER IMPROVEMENT IN LIVING STANDARDS IN 1974 ACROSS THE WHOLE SPECTRUM OF SOCIETY.

BUT THEN CAME THE QUITE UNEXPECTED OIL CRISIS AND THE WORLD ECONOMY WAS KNOCKED OFF COURSE. AFTER MAKING ALLOWANCE FOR THE IMPACT ON THE ECONOMY OF THESE NEW CIRCUMSTANCES BY LAST FEBRUARY IT WAS THOUGHT THAT THE GROSS DOMESTIC PRODUCT IN 1974 WOULD INCREASE AFTER ALL, IN REAL TERMS BY SOME FOUR PER CENT.

WHILST THIS WAS SUBSTANTIALLY LESS THAN MIGHT OTHERWISE HAVE BEEN THE CASE, IT WAS STILL BY NO MEANS INSIGNIFICANT.

TOUCHING ON THE OIL SITUATION, THE GOVERNOR NOTED THAT THE SHORTAGE IN HONG KONG WAS FAIRLY BRIEF. AND OF LITTLE REAL SIGNIFICANCE, AND THE INDUSTRIALISTS ADAPTED TO THE SITUATION OF SHORTAGES AND CHANGES IN THE SUPPLIES AND PRICES OF OIL-BASED RAW MATERIALS WITH THEIR USUAL SPEED.

+OUR EXTERNAL TRADE CONTINUED TO BE BUOYANT IN THE FIRST HALF OF THIS YEAR AND IN THE TWELVE MONTHS TO JUNE 1974, DOMESTIC EXPORTS WERE OVER 8-1/2 PER CENT MORE IN VOLUME THAN IN THE PREVIOUS TWELVE-MONTH PERIOD.+

THE GOVERNOR CONTINUED THAT THE ENORMOUS RISE IN THE PRICE OF OIL, ATTEMPTS BY SOME OTHER COMMODITIES TO FOLLOW SUIT, BALANCE OF PAYMENTS PROBLEMS, LACK OF LIQUIDITY, AND HIGH INTEREST RATES, HAD ALL TOGETHER PRODUCED A SITUATION IN THE REST OF THE WORLD THAT WOULD TAKE TIME TO SOLVE, AND THAT A PERIOD OF ADJUSTMENT WAS INEVITABLE.

+HOWEVER, THESE INTERCONNECTED PROBLEMS ARE OF SUCH GREAT IMPORTANCE FOR THE WORLD'S ECONOMIES, AND I MIGHT ADD THE WORLD'S ELECTORATES, THAT AT LEAST WE HAVE THE ASSURANCE THAT THEY ARE RECEIVING MAXIMUM ATTENTION FROM GOVERNMENTS, AND THAT THE BEST BRAINS AVAILABLE EVERYWHERE ARE WORKING ON THEM.

+THE PROBLEMS INVLOVED ARE OF COURSE NEW TO BOTH CREDITORS AND DEBTORS ALIKE. BUT INSOFAR AS THERE HAVE BEEN ANY RECENT DEVELOPMENTS THEY HAVE BEEN IN THE RIGHT DIRECTION.+

THERE HAD AT LEAST BEEN NO FURTHER DRAMATIC RISE IN THE PRICE OF OIL, AND THE BEGINNINGS OF A PROCESS OF RECYCLING OF OIL REVENUES CAN BE DISCERNED.

+PROVIDED THERE IS NO SETBACK, ONE CAN REASONABLY EXPECT THAT IN DUE COURSE THESE TENDENCIES WILL DEVELOP, WITH OIL PRICES STABILISING, THE PROCESS OF RECYCLING GAINING MOMENTUM AND FINDING NEW INSTITUTIONAL CHANNELS, INTEREST RATES DECLINING FROM THE IR PRESENT LEVELS, AND GENERALLY SPEAKING AN EASING OF CURRENT CONSTRICTIONS ON INVESTMENT AND DEMAND,+ HE SAID.

/WHILE A

+