XN000022-1985-10-30 — Page 15

WEDNESDAY, OCTOBER 30, 1985

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THE INFLATION RATE, AT ABOUT 3.8 PER CENT DURING THE

12 MONTHS TO SEPTEMBER THIS YEAR, HAD REMAINED RELATIVELY LOW. THIS HAD BEEN DUE IN PART TO MODERATE RATES OF INFLATION IN THOSE COUNTRIES WHICH WERE HONG KONG'S MAJOR TRADING PARTNERS, TO THE EASING OF WORLD COMMODITY PRICES AND TO THE RELATIVE STRENGTH OF THE HONG KONG DOLLAR.

THE ECONOMY, SIR EDWARD SAID, REMAINED DEPENDENT ON TRADE AND HENCE VULNERABLE TO EXTERNAL FORCES OUTSIDE HONG KONG'S CONTROL.

CONSUMER DEMAND IN HONG KONG'S EXPORT MARKETS AND THE WILL INGNESS OF OTHER GOVERNMENTS TO ALLOW CONSUMERS FREEDOM OF CHOICE WERE CLEARLY IMPORTANT FACTORS, HE STRESSED.

BALANCED BUDGET EXPECTED

****

+ THE RETURN TO A BALANCED BUDGET IS NOW A REALISTIC EXPECTATION, THE GOVERNOR, SIR EDWARD YOUDE, TOLD THE LEGISLATIVE COUNCIL TODAY.

DISCUSSING PUBLIC FINANCES, SIR EDWARD EXPLAINED THAT

A REVIVAL OF ACTIVITY IN THE PROPERTY MARKET HAD BROUGHT BETTER THAN EXPECTED RESULTS FROM LAND SALES.

THESE, TOGETHER WITH IMPROVED YIELDS FROM EARNINGS AND PROF ITS TAX, SHOULD RESULT IN TOTAL REVENUE FOR THE YEAR BEING HIGHER THAN ORIGINALLY ESTIMATED, HE SAID.

EXPENDITURE ON GENERAL REVENUE ACCOUNT WAS ALSO LIKELY TO BE HIGHER THAN ESTIMATED, AS A RESULT OF $1.5 BILLION BEING INJECTED AS ADDITIONAL EQUITY INTO THE MASS TRANSIT RAILWAY CORPORATION.

THE NET EFFECT AT THE END OF THE YEAR WOULD BE A SMALLER DEFICIT THAN ORIGINALLY FORECAST.

SIR EDWARD SAID ALSO THAT EXPENDITURE ON CAPITAL WORKS HAD BEEN SLOWER THAN ORIGINALLY FORECAST. AS A RESULT THE SIZE OF THE PUBLIC SECTOR AS A PROPORTION OF GROSS DOMESTIC PRODUCT SHOULD DECLINE TO BELOW 16 PER CENT IN THE FINANCIAL YEAR 1985-86.

DISCUSSING TAXATION, SIR EDWARD SAID THAT BOTH THE GOVERNMENT AND THE BUSINESS COMMUNITY REMAINED IN FULL AGREEMENT ON THE NEED FOR A SIMPLE AND EQUITABLE SYSTEM,

+THE LEVELS ARE SET CAREFULLY SO AS TO PROVIDE FOR HONG KONG'S ESSENTIAL FISCAL NEEDS, BUT WITHOUT ACTING AS A DISINCENTIVE TO ENTERPRISE.

/+WR SHALL