XN000022-1981-10-07 — Page 28

WEDNESDAY, OCTOBER 7, 1981

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THREE UNFAVOURABLE FEATURES

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THREE UNFAVOURABLE FEATURES STOOD OUT FROM THE PICTURE OF HONG KONG'S ECONOMIC SITUATION, WHICH WAS OTHERWISE FAVOURABLE AGAINST THE BACKGROUND OF AN UNFAVOURABLE WORLD SITUATION, THE GOVERNOR, SIR MURRAY MACLEHOSE SAID.

THESE WERE THE IMPACT OF RECENT IMMIGRATION, THE SHARP RISES IN THE COST OF ACCOMMODATION AND LAND, AND A DEPRECIATING HONG KONG DOLLAR.

ON THE IMPACT OF IMMIGRATION, SIR MURRAY SAID THAT, FOR INSTANCE, THE AVERAGE ANNUAL INCREASE IN POPULATION, INCLUDING NATURAL INCREASE, BETWEEN 1971 AND 1978 WAS 1.8 PER CENT PER ANNUM, BUT IT MORE THAN DOUBLED TO 3.8 PER CENT BETWEEN 1979 AND 1981.

THE GROWTH IN THE LABOUR FORCE HAD BEEN EVEN MORE DRAMATIC BEING 3.4 PER CENT A YEAR BETWEEN 1971 AND 1978 BUT 7.4 PER CENT BETWEEN 1979 AND 1981.

+ IMMIGRANT LABOUR WAS ONE DIRECT CAUSE OF THIS INCREASED GROWTH. IT ALSO PROVIDED AN INDIRECT CAUSE IN THAT BY RESTRAINING WAGE INCREASES, ADDITIONAL PERSONS WENT TO WORK SO AS TO MAINTAIN THE RISING LEVEL OF FAMILY INCOME TO WHICH THEY HAD BEEN ACCUSTOMED.

+THE IMPACT OF THESE UNFORESEEN NUMBERS WILL BE FELT IN MANY WAYS FOR MANY YEARS TO COME, SIR MURRAY SAID.

THE SHARP RISES IN THE COST OF ACCOMMODATION AND LAND, FUELLED BY THE EASY AVAILABILITY OF CREDIT, CAUSED CONSIDERABLE DISTRESS, HE SAID.

+ IN THE KNOWLEDGE THAT LARGE SUPPLIES OF ACCOMMODATION AND LAND WERE COMING FORWARD THAT SHOULD ARREST OR REVERSE THE UPWARD TREND, YOUR GOVERNMENT, AFTER SOME HESITATION, DECIDED NOT TO INTERVENE IN THE COMMERCIAL SECTOR,+ SIR MURRAY SAID.

+AS EXPECTED THE UPWARD TREND HAS BEEN ARRESTED THIS YEAR PARTLY BECAUSE OF ADDITIONAL SUPPLY STIMULATED BY HIGH PRICES AND PARTLY BECAUSE THE HIGH COST OF BORROWING DEPRESSED DEMAND.

+A CLOSER BALANCE BETWEEN SUPPLY ANID DEMAND HAS NOW BEEN ACHIEVED.

+BUT, BECAUSE IT TAKES TIME FOR SUPPLY IN THE PROPERTY MARKET TO CATCH UP WITH INCREASES IN DEMAND, I FEAR THAT THE EXPERIENCE WE HAVE BEEN THROUGH MAY BE REPEATED IN THE FUTURE, HE ADDED.

SIR MURRAY SAID THAT AT THE END OF EACH OF THESE CYCLES, WE BENEFIT FROM A SUBSTANTIAL INCREASE IN THE STOCK OF ACCOMMODATION BUT, WITH THE EFFECT OF ORDINARY MARKET FORCES DISTORTED BY SPECULATION, AT A SUBSTANTIAL SOCIAL COST.

ON THE DEPRECIATING HONG KONG DOLLAR SIR MURRAY SAID THAT WHILE IT HELPS EXPORT COMPETITIVENESS, IT ADDS INFLATIONARY PRESSURES TO THE ECONOMY.

/+BUT ANOTHER