XN000022-1985-02-27 — Page 6

WEDNESDAY, FEBRUARY 27, 1985

+ IF THEY ARE BORNE OUT, ECONOMIC GROWTH IN 1985 WILL CONTINUE TO BE EXPORT-LED, BUT WITH AN INCREASING CONTRIBUTION FROM DOMESTIC DEMAND. THE GROWTH RATE OF TOTAL FINAL DEMAND (EXCLUDING RE- EXPORTS), AT 8.5 PER CENT, IS EXPECTED TO EXCEED THAT OF THE GDP, AT SEVEN PER CENT, BUT NOT SUFFICIENTLY TO GENERATE SIGNIFICANT INTERNAL INFLATIONARY PRESSURES.

+UNDER THE LINKED EXCHANGE RATE SYSTEM, INFLATION IN HONG KONG IS EXPECTED TO CONTINUE TO FALL IN 1985 TO A LEVEL CLOSER TO THAT IN THE UNITED STATES. THE AVERAGE RATE OF INFLATION IN 1985 IS THUS EXPECTED TO BE ABOUT 5.5 PER CENT, SIGNIFICANTLY LESS THAN THE 8.1 PER CENT IN 1984. THE FORECAST RATE OF INCREASE IN THE GDP DEFLATOR IS RATHER HIGHER THAN THAT FOR THE CPI AT ABOUT SEVEN PER CENT.

+THE FORECAST GROWTH RATE OF THE GDP IN 1985 IN MONEY TERMS IS THEREFORE 15 PER CENT, IMPLYING A CURRENT PRICE GDP OF $286 BILLION. AT CURRENT PRICES, PER CAPITA GDP IN 1985 SHOULD THUS BE OVER $52 000, OR ABOUT US$6 700.

+THERE IS REASON TO TRUST THE INNATE WIT AND INTELLIGENCE OF OUR CITIZENS. THE MAJORITY CAN SEE THAT OVER A CYCLE OF YEARS A BALANCED BUDGET FOR HONG KONG IS AS ESSENTIAL AS IT IS IN THEIR OWN HOUSEHOLDS. THIS IS BEING ACHIEVED BY CONTINUAL DOWNWARD PRESSURE BY THE ADMINISTRATION ON PUBLIC SECTOR EXPENDITURE AND BY CONTINUAL UPWARD PRESSURE ON REVENUE.

+THERE ARE NOW MANY, AND THERE WILL BE MANY MORE, DECENT MINDED PEOPLE WHO ADVOCATE INCREASED GOVERNMENT SPENDING IN SECTORS

IN WHICH THEY HAVE A SPECIAL INTEREST. IT IS, HOWEVER, A FACT OF LIFE THAT LITERALLY NO LIMIT CAN BE PUT ON EXPENDITURE REPRESENTING VARIOUS SOCIAL ASPIRATIONS UNLESS TIGHT CONTROLS ARE MAINTAINED ON THE TAXPAYERS' MONEY AND ON THE LEVYING OF NEW TAXES. FURTHER INCREASES IN DIRECT TAXATION IN PARTICULAR ARE AT LEAST UNDESIRABLE.

+WISE SPENDING THERE MUST BE AND INDEED MORE AS THE COMMUNITY GETS RICHER. BUT EVERY NEW PROPOSITION MUST BE SUBJECT TO TEST BY TWO SIMPLE QUESTIONS. WHAT ARE THE PRIORITIES? WHERE IS THE MONEY COMING FROM? DEFICIT FINANCE IS A PROFLIGATE'S REFUGE - PARTICULARLY IN THE LIGHT OF HONG KONG'S EXPOSURE TO EXTERNAL SHOCKS. } CONCLUDE THEREFORE BY QUOTING DICKENS, WHOSE WORDS WILL, I BELIEVE, STRIKE A GENERAL NOTE OF APPROVAL IN HONG KONG: ANNUAL INCOME TWENTY POUNDS, ANNUAL EXPENDITURE NINETEEN NINETEEN SIX, RESULT HAPPINESS. ANNUAL INCOME TWENTY POUNDS, ANNUAL EXPENDITURE TWENTY POUNDS OUGHT AND SIX, RESULT MISÉRY,+

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