In Hong Kong yesterday financial secretary John Tsang Chun-wah released his latest budget. Hong Kong’s financial year runs from 1 April to 31 March. The overall review of this latest oeuvre is it is conservative and focused on the short term.
On the up side any politician today would love to present a budget with a surplus. Yet for 2012-13 Tsang is forecasting a deficit of HK$3.4 billion. He does have a history of forecasting deficits and turning in surplus. Last year he predicted a deficit of HK$8.5 billion and instead will end with a surplus of HK$67 billion or more. During his years in the role Tsang has under-estimated the year-end surplus by an average of HK$63 billion each year.
These surpluses accumulate and today Hong Kong has HK$662 billion in accumulated fiscal reserves (that’s equivalent to US$85 billion or AU$79 billion). The US National Debt Clock shows that nation is US$1.5 trillion in debt – with an increase of US$4 billion each day. Per person that means every American owes US$49,211.65 – a staggering amount.
In Hong Kong the accumulated reserve equates to HK$93,635 per person – or US$12,074 (based on overall population of 7.07 million). That’s a good start on the interest bill for the US deficit!
And if that $662 billion number sounds familiar – it’s the amount in US Dollars of the US Defense spending passed by Congress in December 2011.
Back to the budget!
With the strong base of earnings, Hong Kong will be able to lower taxes and provide some relief to families and small businesses. This is a safe, no-nonsense budget proffered by a man likely to be in his last year in the role.
What’s lacking? Longer term commitments to tax relief, especially for small and medium enterprises. The conservative estimates mean the government is unwilling to spend extra. Then every year a small deficit turns into a large surplus.
In the face of growing economic uncertainty in Europe, Hong Kong has opted with a conservative budget – offering some relief but keeping the powder dry in case worse time are ahead.