XN000022-1984-02-29 — Page 20

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WEDNESDAY, FEBRUARY 29, 1984

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NEVERTHELESS, THE IMPROVEMENT IN EXPORT DEMAND WAS NOT MATCHED BY A RECOVERY IN PRIVATE SECTOR INVESTMENT. THIS WAS GENERALLY DEPRESSED, ESPECIALLY FOR BUILDING AND CONSTRUCTION, WHERE A FALL OF 13 PER CENT IN REAL TERMS OCCURRED.

THERE WERE SIGNS TOWARDS THE END OF THE YEAR THAT THE SLUMP IN THE PROPERTY MARKET MIGHT BE BOTTOMING OUT AND THAT INVESTMENT IN PLANT AND MACHINERY HAD BEGUN TO RECOVER IN THE FOURTH QUARTER. HOWEVER THERE WAS A FALL OF EIGHT PER CENT IN REAL TERMS IN PRIVATE SECTOR INVESTMENT EXPENDITURE FOR THE YEAR AS A WHOLE.

SIR JOHN SAID THE GROWTH RATE OF PUBLIC SECTOR EXPENDITURE ON BOTH CONSUMPTION AND CAPITAL ACCOUNT WAS LOWER THAN IN EARLIER YEARS. IN REAL TERMS IT WAS ONLY FOUR PER CENT REFLECTING THE ACCOMPLISHMENT OF BUDGETARY RESTRAINT.

IN NET TERMS THE INCREASES IN THE VARIOUS COMPONENTS OF THE EXPENDITURE ON THE GDP GAVE AN OVERALL GROWTH RATE OF 5.9 PER CENT IN 1983, WHICH REPRESENTED A CONSIDERABLE IMPROVEMENT OVER THE GROWTH RATE FOR 1982 OF ONLY 1.1 PER CENT BASED ON THE REVISED GDP ESTIMATES.

+ THE RECENT REVISIONS, OR RATHER THE UPDATING OF THE METHOD OF ESTIMATING EXPENDITURE ON THE GDP, HAVE HAD THE EFFECT OF CHANGING THE ESTIMATED GROWTH RATES FOR 1982 AND 1983. ON THE OLD BASIS THEY WERE 2.4 PER CENT AND WOULD HAVE BEEN OVER EIGHT PER CENT RESPECTIVELY. THIS OPTIMISTIC LAST FIGURE WOULD HAVE HAD A MAJOR (IF MISLEADING) IMPACT. +

THE ACCELERATED GROWTH RATE IN THE ECONOMY IN THE 1983 RESULTED IN MARKED IMPROVEMENTS IN BOTH THE UNEMPLOYMENT AND UNDER-EMPLOYMENT RATES. IN THE FOURTH QUARTER THE SEASONALLY- ADJUSTED UNEMPLOYMENT RATE WAS FOUR PER CENT AND THE UNDER- EMPLOYMENT RATE WAS 1.4 PER CENT.

THE IMPROVEMENT IN THE UNDER-EMPLOYMENT RATE MADE A MAJOR CONTRIBUTION TO A NOTICEABLE INCREASE OF 4.9 PER CENT IN OUTPUT PER EMPLOYED PERSON.

+MEMBERS WELL KNOW THE IMPORTANCE THAT I ATTACH TO EMPLOYMENT FIGURES, SIR JOHN SAID. +FULL EMPLOYMENT HERE IS PROBABLY REPRESENTED BY AN UNEMPLOYMENT RATE BETWEEN THREE PER CENT AND 3-1/2 PER CENT.

SIR JOHN SAID AMONG THE UNSATISFACTORY ASPECTS OF THE ALTHOUGH LOWER ECONOMY IN 1983 WAS THE RATE OF INFLATION. THAN IN 1982, THIS, IN TERMS OF THE CONSUMER PRICE INDEX AT ABOUT 10 PER CENT, WAS ONE PER CENT ABOVE HIS ESTIMATE.

MANY THOUGHT IT WAS. + IT COULD EASILY HAVE BEEN WORSE. ALTHOUGH MOST INFLUENCES ON THE OVERALL PRICE LEVEL, SUCH AS PRESSURE OF DEMAND WITHIN THE ECONOMY, MOVEMENTS OF PRICES AND RENTALS FOR PROPERTY, AND LOWER INFLATION IN HONG KONG'S MAJOR TRADING PARTNERS, WERE HELPING TO DAMPEN DOWN THE RATE OF INFLATION, THEY WERE INSUFFICIENT TO OFFSET THE EFFECT OF THE DEPRECIATION OF THE EXCHANGE RATE.

/+IN PARTICUL

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