XN000022-1990-05-09 — Page 21

WEDNESDAY, MAY 9, 1990

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"THE ZERO-RATING OF THE CLAWBACK ON PERSONAL ALLOWANCES AND THE REDUCTION OF THE RATES OF SALARIES TAX APPLICABLE TO THE FIRST TWO $10,000 BANDS OF NET CHARGEABLE INCOME ARE PARTICULARLY ΤΟ THEIR ADVANTAGE. AGAIN, THEY WILL ALSO HAVE BENEFITED FROM REAL IMPROVEMENTS IN EARNINGS," HE SAID.

ON INFLATION, SIR PIERS SAID HE APPRECIATED THAT THE CONCERN EXPRESSED BY MEMBERS REGARDING THE IMPACT OF THE BUDGET WENT BEYOND THE ACTUAL BUDGETARY MEASURES THEMSELVES, AND INCLUDED THE EFFECT ON INFLATION.

"INFLATION WAS DESCRIBED BY MORE THAN ONE MEMBER AS PUBLIC ENEMY NUMBER ONE. LET ME SAY AT THE OUTSET THAT I SHARE MEMBERS' VIEW THAT INFLATION IS A VERY REAL PROBLEM INDEED,' HE SAID.

H

HE SAID THE RATE OF INCREASE IN THE CONSUMER PRICE INDEX (A) ROSE TO 10PER CENT IN MARCH, AFTER MODERATING FROM 9.8PER CENT IN JANUARY TO 8.4PER CENT IN FEBRUARY. THIS INCREASE WAS DUE IN PART TO HIGHER UTILITY CHARGES AND, AS HE ACKNOWLEDGED IN HIS BUDGET SPEECH, FISCAL DUTIES.

*

'NEVERTHELESS, FOR THE FIRST QUARTER AS A WHOLE, THE RATE OF INCREASE IN THE CPI(A), AT 9.4PER CENT, HAS EASED FROM THE PEAK LEVEL OF 11PER CENT IN 1989.

. "THE CURRENT INFLATIONARY PRESSURES ARE MOSTLY DOMESTICALLY GENERATED RATHER THAN IMPORTED. THIS IS APPARENT FROM THE FASTER INCREASES IN PRICES FOR THOSE ITEMS IN THE CPI WHICH HAVE A HIGH LOCAL SERVICE CONTENT, SUCH AS MEALS AT RESTAURANTS, PUBLIC TRANSPORT, AND VARIOUS TYPES OF SERVICES.

AMONG

"THE TIGHT LABOUR MARKET HAS LED TO KEEN COMPETITION EMPLOYERS FOR SCARCE LABOUR RESOURCES. THE CONSEQUENT SURGE IN WAGES AND PRICES DEMONSTRATES CLEARLY THAT DEMAND IS OUTSTRIPPING SUPPLY.

"HONG KONG IS, HOWEVER, NOT ALONE IN THIS PROBLEM. MANY ECONOMIES ELSEWHERE ARR CURRENTLY FACING MOUNTING INFLATIONARY PRESSURES FROM THE SAME CAUSE.

"THE CHIEF SECRETARY HAS ALREADY RESPONDED TO THOSE MEMBERS WHO, IN THIS CONNECTION, PRESSED FOR A FURTHER RELAXATION OF OUR POLICY ON IMPORTATION OF LABOUR, HE SAID.

THE FINANCIAL SECRETARY SAID PRICE INCREASES WERE NEVER WRLCOME, BUT HE SHOULD POINT OUT THAT IN RECENT YEARS INCOMES HAD RISEN FASTER THAN INFLATION.

"FOR EXAMPLE, EARNINGS OF EMPLOYEES IN THE MANUFACTURING AND SERVICE SECTORS ROSE BY AN AVERAGE OF 5PER CENT AND 6PER CENT RESPECTIVELY IN REAL TERMS LAST YEAR.

"AS A CONSEQUENCE, OUR STANDARD OF LIVING HAS CONTINUED TO IMPROVE. THIS IS REFLECTED IN THE CONTINUING STRONG DEMAND FOR SMALL TO MEDIUM-SIZED RESIDENTIAL FLATS AND IN INCREASED EXPENDITURE ON LEISURE ACTIVITIES, THE FINANCIAL SECRETARY SAID.

H

/HE POINTED