XN000022-1989-04-26 — Page 17

BUDGET FORECAST

—

15

WEDNESDAY, ARPIL 26, 1989

AN UNDER-ESTIMATE DR DANIEL TSE

THE INFLATION RATE OF 8.5 PER CENT IN 1989 FORECAST BY THE FINANCIAL SECRETARY SEEMED TO BE AN UNDER-ESTIMATE GIVEN THE MORE THAN 10 PER CENT RISE IN WAGES AND SALARIES IN THE PRIVATE SECTOR, DR THE HON DANIEL TSE OBSERVED TODAY (WEDNESDAY).

SPEAKING DURING THE BUDGET DEBATE IN THE LEGISLATIVE COUNCIL, DR TSE SAID THAT IF THE SALARY ADJUSTMENTS IN THE CIVIL SERVICE WERE TO FOLLOW SUIT, AS WERE WIDELY EXPECTED, THE INFLATION RATE COULD EVEN BE IN THE DOUBLE DIGIT COLUMN.

HE DOUBTED THE FINANCIAL SECRETARY'S SUGGESTION THAT THE RATE

AS MIGHT BEGIN TO FALL "PROBABLY IN THE LATTER PART OF THE YEAR",

THE LABOUR MARKET SEEMED TO CONTINUE TO REMAIN TIGHT AND EXPECTATIONS A RAPID RISE IN WAGES AND SALARIES HEIGHTENED.

OF

IN THE

FURTHER, THE INCREASE IN THE ACCUMULATED TRADE SURPLUS SURROUNDING ASIAN COUNTRIES HAD FORCED UP THE VALUE OF THEIR CURRENCIES AND THEIR PURCHASING POWER, AND THEIR

UP DEMAND IMMENSE PRESSURE

OUR

AND PRODUCTS DOMESTIC RESOURCES.

SERVICES

HAD EXERTED

PENT

ON

ON

OUR

FINANCIAL DR TSE SAID THAT THE

SECRETARY'S EXPLANATION THAT SUCCESS OF INFLATION WAS CAUSED BY THE

OUR ECONOMY MIGHT NOT BB COMPLETELY VALID, AS HONG KONG'S SURROUNDING COUNTRIES GENERALLY ENJOYED HIGHER ECONOMIC GROWTH BUT LOWER INFLATION RATES.

CONCEDING THAT THE

LINKED

EXCHANGE RATE

WHICH SYSTEM,

HAD

DR

TSE

SERVED HONG KONG WELL, HAD LED TO SUCH A HIGH INFLATION RATE, CALLED FOR A PERIODIC REVIEW FOR ITS ADEQUACY.

SIDE EFFECT OF DEPRECIATION

THE

FOR

THAT HE POINTED OUT

ONE VERY OBVIOUS EXISTING SYSTEM WAS THAT IT CREATED A PSYCHOLOGY OF THE HONG KONG DOLLAR, AND HAD INDUCED PEOPLE TO NON-US DOLLAR FOREIGN CURRENCY DEPOSITS.

PUT THEIR MONEY IN

"THIS IS NOT HEALTHY AS THE SMALL INVESTORS MAY TO HEDGE AGAINST CURRENCY RISK, HE SAID.

"

NOT KNOW

HOW

THE DR TSE SUGGESTED THAT GOVERNMENT SHOULD STUDY MORE CLOSELY

AND KEEP AN OPEN OPERATION AND THE PROBLEMS OF THE EXISTING SYSTEM MIND ON POSSIBLE ALTERNATIVES SUCH AS THE BASKET-PEGGED CURRENCY SYSTEM.

EXCHANGE

THE RATE,

TWO HONG KONG WERE DEMAND FOR OUR DOMESTIC

HE NOTED THAT, APART FROM THE LINKED COMMONLY ACCEPTED EXPLANATIONS FOR HIGH INFLATION IN

LOCAL AND FOREIGN THE RAPID INCREASE IN RESOURCES, AND THE TIGHT SUPPLY SIDE CONSTRAINT.

THE

CAPITAL

INCREASE HE WELCOMED THE PROPOSAL TO

ALLOWANCES WOMEN BUT REGRETTED AND TO INTRODUCE SEPARATE TAXATION FOR MARRIED

OF A THAT THESE PROPOSALS WERE NOT MADE IN THE BUDGET SPEECH AS PART COMPREHENSIVE PLAN TO ALLEVIATE THE CAPACITY CONSTRAINT.

/IN FACT ...