Hong Kong unveiled a modest package of measures for its working class in its budget on Wednesday, as it tries to ease pressure on its finances while appeasing voters increasingly concerned about the city's growing income gap. In a speech focused on maintaining Hong Kong's competitiveness, Financial Secretary John Tsang said its economy grew 2.9 percent last year compared with 1.5 percent in 2012, and was expected to expand 3 to 4 percent this year.
The budget contained some tax cuts for the working class but a bumper "give-away" package didn't materialise this time. "In terms of the relief measures, this is within our expectation. We consider these relief measures can help relieve the rising living cost of the middle class as well as the grassroots," said Jennifer Wong, a tax partner at KPMG China. "This is a forward-looking budget."
Tsang did budget around HK$20 billion in one-off relief measures including tax concessions, rent subsidies for public housing tenants and welfare handouts. But that was below the previous year's HK$33 billion in one-off assistance. The city's lower- and middle-income families struggle with rising costs from home prices that have more than doubled since 2008, and the spillover effects of a strengthening yuan.
A Reuters poll of analysts had estimated the economy would grow 3.5 percent this year. Government finances are highly volatile because of a narrow tax base - only a third of wage earners pay income tax and it is heavily reliant on revenues from selling land to developers, limiting its ability to clamp down on the sector. A targetted 470,000 residential flats would be built in the coming 10 years and 71,000 private units are also expected to come onto the market within four years to help supply. The government recorded a provisional surplus of HK$12 billion ($1.6 billion) for the 2013/14 fiscal year, in line with expectations, but far less than HK$64.8 billion last year.
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