XN000022-1978-03-01 — Page 9

WEDNESDAY, MARCH 1, 1978

ON THE RELATIONSHIP BETWEEN PUBLIC SECTOR EXPENDITURE AND THE G.D.P., THE FINANCIAL SECRETARY SAID THAT ASSUMING NO CHANGES IN BUDGETARY OR FISCAL POLICIES, THE SIZE OF THE PUBLIC SECTOR AS MEASURED BY THE RATIC OF PUBLIC SECTOR EXPENDITURE TO THE G.D.P. WOULD, OR SHOULD, EXHIBIT CYCLICAL VARIATIONS, PERHAPS EVEN ON A SLOWLY RISING TREND. +THAT IS TO SAY, IT WILL (OR SHOULD) INCREASE ON THE DOWNSWING PHASE OF ECONOMIC ACTIVITY AND DECREASE ON THE UPSWING, AND TEND TO INCREASE AGAIN AS THE RECOVERY PHASE MATURES,+ HE SAID. +THUS THE RATIC DECREASED FRCI A HIGH OF 18.8 PER CENT IN THE TROUGH YEAR 1974-75, TO AL AVERAGE OF 16.5 PER CENT IN THE TWO UPSWING YEARS 1975-76 AND 1976-77 AND THEN INCREASED AGAIN TO 17.2 PER CENT IN 1977-78 AS THE GROWTH RATE OF THE ECONOMY (IN MONEY TERM) DECELERATED (FROM 27 PER CENT IN 1976 TO 15 PER CENT IN 1977),+ HE SAID. + IN THE COMING FINANCIAL YEAR, 1978-79, IF THE PUBLIC SECTOR'S SPENDING PERFORMANCE MATCHES FUNDS AVAILABLE AND THE G.D.P. FORECAST (FOR 1978) IS ACCURATE, THE RATIO WILL INCREASE FURTHER TO 18.4 PER CENT,+ HE ADDED.

ON THE GROWTH RATE OF GENERAL REVENUE ACCOUNT EXPENDITURE, MR. HADDON-CAVE SAID IN REAL TERMS, THE INCREASE BUDGETED FOR IN 1978-79 WAS 21 PER CENT COMPARED WITH 16 PER CENT IN 1977-78 (REVISED ESTIMATE) AND 3.4 PER CENT IN 1976-77 (AND WAS NO LESS THAN A 46 PER CENT INCREASE ON 1974-75). +THUS THE GROWTH RATE OVER THE FIVE YEARS 1974-75 TO 1978-79 INCLUSIVE WILL DE VIRTUALLY UP TO THE STEADY-PROGRESSION GUIDELINE OF 10 PER CENT PER ANNUM,+ HE SAID.

ON THE STATE OF OUR FISCAL RESERVES, THE FINANCIAL SECRETARY SAID, +ALTHOUGH THE LEVEL OF OUR FISCAL RESERVES MUST KEEP IN STEP WITH THE LEVEL OF EXPENDITURE, AS THE FREE ELEMENT IN CUR RESERVES AT APRIL 1, 1978 WILL BE 16.5 PER CENT OF ESTIMATED EXPENDITURE, I SEE NO NEED TO EUDGET DELIBERATELY FOR A SURPLUS.+

+1 REGARD WHAT IS, IN EFFECT, A BALANCED BUDGET TO BE QUITE ADEQUATE TO SECURE OUR FINANCIAL STABILITY EVEN IN THESE UNCERTA [1: TIMES PARTICULARLY AS I HAVE PROVIDED QUITE GENEROUSLY FOR TRANSFERS TO THE DEVELOPMENT LOAN FUND AND THE HOME OWNERSHIP FUND, HE SAID.

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