Friday 25 February 2011

Economics: Hong Kong Budget 2011-2012

I think everyone is talking about the 2011-2012 Budget, so I would also like to join the party. I have selected lots of links to news for you to read at the Resources section below if you want.

Financial Secretary John Tsang before the Budget Speech
Image from Kansas City
But to cut things short, here are a few of John Tsang's moves that fight the problems faced:

ProblemsReactionLocky's Quick Opinion
Risk of Asset-price BubblesAdd a total of 9 residential sites, 5 of which should offer 3000 small and medium-sized flats in total, making a total of 52 [1]52 cards on hand makes a deck of cards, but when will they be used? No time frame. Housing market? Up, up, hurray!!!
Inflation (The Living Human)Will continue to diversify the sources of our food imports. [2]Buy more from places other than China? Only US$ drops like HK$ really. I think we have to import food from Mars.
Inflation (The Rich)Will issue
$5 billion to $10 billion worth of Hong Kong-dollar iBond under the Government Bond Programme. [3]
Sorry, I have no money to buy bonds. Even if I do have money to buy bonds, I have to put all my money in there to ensure my cash isn't eroded, then where do I get money for food? Why not just give me the cash?
Inflation (The Electronics)Granting each residential electricity account a subsidy of $1,800. This will cost the Government about $4.7 billion [4]This is okay, if you owe a place yourself or if your rent doesn't cover the electric bill. Because if your rent and the bills come in a package, then your landlords get all!
Inflation (The Rich)Waiving rates for 2011-12, subject to a ceiling of $1,500 per quarter for each rateable property. It is estimated that about 82 per cent of properties will be subject to no rates in the year. This proposal will cost the Government approximately $9.9 billion [4]This doesn't benefit anyone who has no property
Inflation (The Supported)Paying two months' rent for public housing tenants...This measure will involve expenditure of approximately $1.9 billion [4]Reasonable enough, but if you rent a private apartment, then sorry!

Inflation (The Poor and Needy)Providing an extra allowance to Comprehensive Social Security Assistance (CSSA) recipients, equal to one month of the standard rate CSSA payments; and an extra allowance to Old Age Allowance and Disability Allowance recipients, equal to one month of the allowances. This proposal will involve an additional expenditure of about $1.9 billion. [4]Good move, but is one month CSSA enough?

Inflation (The Responsible)Increasing the allowance for maintaining dependent parents/grandparents by 20 per cent... This measure will benefit about 510 000 taxpayers and cost the Government $570 million a year  [4]Fair enough, but that is so little money!!!

Inflation (The future generation)Raising both the child allowance and the additional one-off child allowance in the year of birth by 20 per cent from $50,000 to $60,000 for each child.
I estimate that this measure will benefit about 300 000 taxpayers, costing the Government $650 million a year.  [4]
Another small budget deal.

Inflation (MPF)a one-off injection of $6,000 into the MPF accounts of all MPF scheme members and members of occupational retirement schemes covered by the Employment Ordinance of Hong Kong as of 23 February 2011... $24 billion for this measure. The Financial Services and the Treasury Bureau will announce the details in due course   [5]WHAT???????? MPF????? Cash me out, man!!!!


What is my verdict of the Hong Kong Budget 2011-2012? All smoke and no fire.

Chan Wai-Yip threw "Hell Money" at John Tsang a day after the Budget Speech
Image from The Standard

The most talked-about was his argument against the $6000 tax rebate. He claims that a tax rebate will drive up the inflation level further, but will it? First, you have to look at how much tax you have taken from the citizens this year. If the tax rebate is less than the tax collected, then obviously, his argument doesn't stand!

So, how much has the government collected from us? "The revised estimate for total revenue is $374.8 billion" [6] (here is more past records for your reference).

How much will the $6000 MPF injection cost? Only $24 billions![5] So that is less than 10% of the money they take from us! If giving us back $1 when we give you $10 will increase inflation, then that means taking money away from us will help solve inflation? Ridiculous! If they really think so, then the government officials should really get pay cuts, because that will fight inflation!

Homework: Can you think of more points of counter-arguments?

to cash sb out -- (slang) to pay sb with cash
verdict -- (n) [C] an opinion or decision made after judging the facts that are given, especially one made at the end of a trial
All smoke and no fire -- an idiomatic expression which describes something that was originally expected to be great or exciting turns out to be much less than amazing. For more details, please read this link.

The 2011-2012 Budget

Hong Kong Budget 2011-12: Highlights and Analysis of Housing Policy @ Business Insider

Inflation-buster $10b iBond of limited interest @ The Standard

Bridge wealth gap, warns Leung @  The Standard

Saying: All work and no play (makes Jack a dull boy) @ Locky's English Playground

Tax Revenue @ Inland Revenue