XN000022-1982-02-24 — Page 28

WEDNESDAY, FEBRUARY 24, 1982

27

ANOTHER FACTOR WHICH CONTRIBUTED TO DOMESTIC INFLATIONARY PRESSURES WAS THE CONTINUED GROWTH OF LOANS AND ADVANCES FOR USE IN HONG KONG, DESPITE MAINTENANCE OF THE BEST LENDING RATE AT HISTORICALLY HIGH LEVELS, MR BREMRIDGE SAID.

FOR THE YEAR AS A WHOLE, HE SAID, LOANS AND ADVANCES FOR USE IN HONG KONG GREW BY 45 PER CENT AND THE MONEY SUPPLY M3 GREW BY 27 PER CENT.

+PART OF THE RAPID EXPANSION IN DOMESTIC CREDIT WAS ATTRIBUTED TO THE LEVEL OF MONEY MARKET RATES, WHICH WERE AT TIMES LOW IN RELATION TO THE BEST LENDING RATE, AND AT TIMES BOTH RATES WERE LOW IN RELATION TO THE RATE OF INFLATION.

+THUS BORROWERS WERE ABLE TO RESORT TO LENDING FACILITIES ARRANGED ON A LESS EXPENSIVE COST-OF-FUNDS (HIBOR) BASIS, WHICH FRUSTRATED IN PART THE RESTRAINT ON BORROWING WHICH WOULD OTHERWISE HAVE BEEN EXERTED BY THE RELATIVELY HIGH BEST LENDING RATE.+

CONSEQUENTLY, MR BREMRIDGE SAID, AN EXPERIMENTAL SCHEME WAS IMPLEMENTED IN NOVEMBER TO ENABLE THE GOVERNMENT TO INTERVENE IN THE MONEY MARKET THROUGH THE EXCHANGE FUND IN AN ATTEMPT TO INFLUENCE THE LEVEL OF MONEY MARKET RATES.

+ IT IS TOO EARLY TO ASSESS THE EXTENT TO WHICH THE SCHEME HAS YET PLAYED A PART IN CURBING THE UNTOWARD EXPANSION OF DOMESTIC CREDIT. CERTAINLY IT IS NOT A CURE-ALL, AND I DO NOT RULE OUT THE INTRODUCTION OF ADDITIONAL ARRANGEMENTS IF OTHER EFFICIENT AND EQUITABLE MEASURES CAN BE DEVISED.

HOWEVER, MR BREMRIDGE SAID THE GROWTH RATE OF THE MONETARY AGGREGATES DID SLOW DOWN DURING THE YEAR. LOANS AND ADVANCES FOR USE IN HONG KONG ROSE BY 26 PER CENT IN THE FIRST HALF OF THE YEAR AND BY 15 PER CENT IN THE SECOND HALF. SIMILARLY M3 ROSE BY 20 PER CENT IN THE FIRST HALF AND BY ONLY SIX PER CENT IN THE SECOND HALF.

ON THE LABOUR MARKET, EMPLOYMENT GREW SUBSTANTIALLY AND THE UNEMPLOYMENT RATE, WHICH HAD BEEN INCREASING CONTINUOUSLY SINCE MARCH 1979 UNDER THE INFLUENCE OF IMMIGRATION, ALSO STABILISED.

+ IN FACT BETWEEN MARCH AND SEPTEMBER THERE WAS A FALL IN THE UNEMPLOYMENT RATE FROM 4.1 PER CENT TO 3.6 PER CENT WHILE EMPLOYMENT IN THE MANUFACTUR ING SECTOR HIT AN ALL TIME HIGH. IN SOME SECTORS THERE DEVELOPED LABOUR SHORTAGES, AND REAL WAGES BEGAN TO MOVE UP AGAIN, MR BREMRIDGE SAID.

/28