XN000022-1990-03-21 — Page 28

WEDNESDAY, MARCH 21, 1990

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RATE OF INFLATION EXPECTED TO FALL GRADUALLY

* * *

ALTHOUGH INFLATION REMAINS UNCOMFORTABLY HIGH, DESPITE A SLOWING DOWN IN ECONOMIC GROWTH, THIS HAS TO BACKGROUND OF AMPLE JOB OPPORTUNITIES, AND A THE REAL PURCHASING POWER OF THE TERRITORY'S WORK FORCE.

BE VIEWED CONTINUING

AGAINST THE INCREASE IN

THE ACTING FINANCIAL SECRETARY, THE HON DAVID NENDICK, TOLD THE LEGISLATIVE COUNCIL THIS TODAY (WEDNESDAY) IN REPLY TO A QUESTION FROM THE HON PETER H.Y. WONG.

MR NENDICK SAID THE SO-CALLED WAGE-PRICE SPIRAL DID NOT HAVE AS GREAT A SIGNIFICANCE IN HONG KONG AS IN OTHER PARTS OF THE WORLD.

NOTING THAT BY FAR THE

LARGEST PART OF THE LOCALLY WERE EXPORTED, HE SAID DOMESTICALLY GENERATED AS THAT AT THE MOMENT WOULD, SOONER OR LATER, RESULT PRODUCTS BECOMING LESS PRICE COMPETITIVE IN OVERSEAS

GOODS PRODUCED INFLATION SUCH IN HONG KONG'S MARKETS.

"THIS WILL LEAD TO A SLOW-DOWN IN DEMAND FOR THESE PRODUCTS.

"AS THE EFFECT OF THIS WORKS THROUGH THE SYSTEM, INFLATION SHOULD EASE," HE SAID.

MR NENDICK SAID THE PROCESS WOULD BE ACCELERATED IF EMPLOYERS AND EMPLOYEES IN HONG KONG EXERCISED RESTRAINT IN THE CURRENT WAGE ROUND.

IT WAS THE GOVERNMENT'S EXPECTATION THAT THE RATE OF INFLATION WOULD FALL GRADUALLY OVER THE COURSE OF THIS YEAR, HE SAID, ADDING THAT THE RECENT CPI FIGURES SUGGESTED THAT WE WERE MOVING IN THE RIGHT DIRECTION.

MR NENDICK POINTED OUT THAT BECAUSE OF HONG KONG'S SMALL OPEN ECONOMY AND THE DESIRE TO ENSURE EXCHANGE RATE STABILITY WITHIN THE LINKED EXCHANGE RATE SYSTEM, THERE WAS IN FACT VERY LITTLE THAT THE GOVERNMENT COULD DO OTHER THAN MAKING EVERY EFFORT ΤΟ CONTROL THE GROWTH IN PUBLIC EXPENDITURE, WHICH HAD BEEN REPEATEDLY STRESSED AS ESSENTIAL.

SECTOR EXPENDITURE OR TO OUR FREE OF THE ECONOMY, HE

"MEASURES SUCH AS CONTROLLING PRIVATE IMPOSING COMPREHENSIVE PRICE CONTROLS WOULD BE CONTRARY MARKET PRINCIPLES AND DAMAGING TO THE WORKINGS SAID.

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MR NENDICK SAID HE ACCEPTED THAT OVER THE MEDIUM TERM, THE IMPLEMENTATION OF THE PORT AND AIRPORT DEVELOPMENT PROGRAMME AND OF OTHER MAJOR INFRASTRUCTURE PROJECTS COULD LEAD TO CAPACITY CONSTRAINTS IN THE BUILDING AND CONSTRUCTION INDUSTRIES AND WE MUST TAKE CARE ΤΟ SEE THAT THIS DID NOT GIVE RISE то INFLATIONARY PRESSURES.

/"THE BUILDING