XN000022-1981-07-30 — Page 2

THURSDAY, JULY 30, 1981

GOVERNMENT SHARES CONCERN OVER INFLATION

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HONG KONG HAS OUT-PERFORMED MOST OF THE WORLD'S MAJOR ECONOMIES IN TERMS OF ECONOMIC GROWTH AND OF MAINTAINING LOW UNEMPLOYMENT RATES, THE FINANCIAL SECRETARY THE HON JOHN BREMRIDGE SAID TODAY (THURSDAY).

AND ALTHOUGH OUR RATE OF INFLATION IN 1979 AND 1980, WHETHER MEASURED BY THE CONSUMER PRICES INDEXES OR THE GDP DEFLATOR, WAS RAPID, IT WAS NOT OUT OF LINE WITH THE RATE OF

INFLATION IN THESE COUNTRIES.

HE WAS REPLYING TO A QUESTION RAISED AT TODAY'S LEGISLATIVE COUNCIL MEETING BY THE HON PETER C. WONG WHO ASKED WHAT MEASURES THE GOVERNMENT WAS TAKING TO IMPROVE THE SITUATION.

MR BREMRIDGE SAID THE GOVERNMENT WAS AWARE OF PUBLIC CONCERN ABOUT THE HIGH RATES OF INCREASE IN CONSUMER PRICES, AND SHARED THIS CONCERN.

+BUT INFLATION IS A CURRENT PROBLEM WORLD-WIDE, AND GIVEN THE EXTERNALLY ORIENTED NATURE OF OUR ECONOMY WE CANNOT EXPECT TO BE UNAFFECTED, HE SAID.

IN THE FIRST HALF OF THIS YEAR, CONSUMER PRICES AVERAGED ABOUT 14 PER CENT HIGHER THAN IN THE FIRST HALF OF LAST YEAR. THIS IS SOMEWHAT HIGH EVEN IN TERMS OF CURRENT INTERNATIONAL EXPERIENCE BECAUSE OF THE DELAYED EFFECT OF THE DEPRECIATION OF THE HONG KONG DOLLARS DURING THE LAST NINE MONTHS OF 1980 WAS WORKING THROUGH TO THE RETAIL LEVEL.

+BUT THE RATE OF INCREASE IN THE GDP DEFLATOR, WHICH IS REALLY THE BEST MEASURE AVAILABLE ON INFLATION FOR THE ECONOMY AS A WHOLE, IS MUCH LOWER, AS A CLOSER BALANCE BETWEEN THE DEMAND FOR AND SUPPLY OF DOMESTIC RESOURCES, EVEN IN RESPECT OF LAND AND PROPERTY, IS BEING ACHIEVED, MR BREMRIDGE SAID.

A ROUGH ESTIMATE SHOWS THAT THE GDP DEFLATOR IS NOW RUNNING AT A RATE OF ONLY ABOUT 7 TO 8 PER CENT. AGAINST THIS BACKGROUND OUR GDP DEFLATOR THIS YEAR IS CONFIDENTLY EXPECTED TO GROW AT 8 PER CENT.

SO FAR, DOMESTIC EXPORTS ARE UP IN REAL TERMS BY ABOUT 7 PER CENT, AND RE-EXPORTS BY OVER 35 PER CENT. THE VISIBLE TRADE ACCOUNT SHOWS A FAIR DEGREE OF STABILITY: WHILE OUR UNEMPLOYMENT SITUATION BY WORLD STANDARDS IS GOOD - AND INDEED IN SOME AREAS SHORTAGES ARE DEVELOPING.

/+THIS SMS