HK rolls out $1.9b anti-inflation plan

July 17, 2008
HK rolls out $1.9b anti-inflation plan
One-off relief plan includes transport and utility subsidies, freeze in govt fees
HONG KONG - HONG Kong yesterday announced a string of measures in a bid to battle inflation, as rising prices continue to hit the wallets of the city's poorest. Chief Executive Donald Tsang, unveiling the short-term relief package to legislators, said it would cost around HK$11 billion (S$1.9 billion). 'These are extreme times and we need extreme measures,' he said. Mr Tsang stressed that the proposals were temporary and 'once-only' measures to assist the lower- and middle-income groups. The relief package, which must be approved by legislators, includes transport subsidies for students, an extra two months' allowance for pensioners and an extension of free rent for public housing tenants to three months. The city authorities will also provide a HK$1,800 electricity bill subsidy for all households, and freeze government fees related to 'daily lives' for one year. A total of HK$100 million will be allocated to provide food subsidies for low-income families. In a move to help middle-income families, Mr Tsang also pledged to waive the HK$400 monthly maid levy for two years. The relief package would not have any long-term implications for public finances, he said. The anti-inflation measures come as Mr Tsang's popularity has reached a record low amid accelerating inflation and his seeming unwillingness to redistribute the city's fiscal surpluses. Although Hong Kong has forecast a fiscal deficit this year, Fitch ratings agency projects that strong tax revenues will help the government return a HK$17.5 billion surplus. The government has opted largely for stop-gap relief measures rather than implementing longer-term policies to deal with inflation, including increasing social welfare payouts. Hong Kong's consumer prices rose 5.7 per cent in May from a year earlier. Underlying inflation, excluding distortions created by government waivers, is also at 5.7 per cent, the highest in the past 10 years. Prices of meat are more than 50 per cent higher than a year ago, putting pressure on lower- income citizens who spend proportionately more of their pay on food than higher-income earners. Mr Tsang told the Legislative Council yesterday that inflation should come down. 'In the medium term, I believe inflation will moderate,' he said. Last month, the government announced a waiver on fuel taxes for public and commercial transport, following days of demonstrations by truck and bus drivers over surging oil prices. AGENCE FRANCE-PRESSE, BLOOMBERG, REUTERS