Stop the numbers game
by Philip Bowring
SCMP October 4, 2004
Statistics lie. So do government officials.
Take the statistics. Do you sincerely believe the Hong Kong economic growth
data? I do not. As for officials, they appear to deliberately misrepresent
data used to justify cuts in payments for the neediest.
I have mentioned this gross domestic product issue before, but will
go on doing so until I get a satisfactory explanation of why, year
in year out, the actual GDP numbers - that is, those in terms of
the Hong Kong dollars in your pocket - are so different from the
government's "real GDP" boasts.
Take the latest numbers for the second quarter of this year, which
claim 12-per-cent year-on-year growth, bringing the half-year increase
to 9.5 per cent. It sounds impressive. But look more closely and you
will see that the increase in actual dollars for the half-year was
just 5.7 per cent.
The official figure is inflated by the government's GDP deflator,
which purports to adjust the number for inflation, showing that prices
for the economy as a whole were 3.4 per cent lower in the first half
of this year than a year earlier. Any half-wit knows this is not true.
The composite consumer price index (CPI) was just 1.3 per cent lower
for the period, and the import prices were actually 1.9 per cent higher.
Hong Kong consistently manages to claim rising levels of growth. The
phenomenon has become so persistent that some might conclude the figures
are being manipulated. To maintain credibility, the method of calculation
needs fundamental revision to make it more realistic. Last year's big
fall in the deflator was actually blamed on a decline in the terms
of trade - that is, the prices of imported goods were rising while
those of exports were not. This was indeed a perverse result.
Between 1998 and the middle of this year, the sum of annual changes
in the deflator has fallen by a cumulative 24 per cent. By contrast,
the annual average CPI has fallen by just 12.9 per cent over the same
period, and the import price index by 12.5 per cent. In the same period,
wage rates have fallen by about 2 per cent and producer prices for
manufacturers by around 8 per cent.
The nonsense of the deflator allows the government to claim the economy
has expanded by about 18 per cent overall and by 14 per cent in per
capita terms since 1997, even though in current price terms it is still
below the handover level.
Some statistics lie. But others lie about statistics. Look at the
Social Welfare Department's defence of its cut in social security assistance
for the elderly, disabled, sick and unemployed. Mean enough in itself,
this was followed by a barrage of misinformation. Most recently there
was an attempt to rebut the assertion by Jake van der Kamp in this
newspaper that the cuts were much greater than the fall in the cost
of living index for social security recipients. Officials claimed that
before the cuts, payments had been increased in anticipation of price
rises that did not materialise.
In March last year, I queried the government on the relationship between
the index and the payments. From the data provided by the department,
it was clear that the adjustments in 1997-1998 and 1998-1999 were in
response to cost-of-living rises that had already occurred. The price
index rose 6 per cent in 1995-1996 and 4.2 per cent in 1996-1997. The
government data showed no compensating payment adjustment for those
The overpaid senior bureaucrats have since shifted the base of comparison
forward, to make the claim that payments had moved ahead of the cost
of living, and because the adjustments anticipated - rather than followed
- price rises. All the official information I can find suggests this
was never true. Will Mr Tung call for an investigation and find the
truth? Or is accountability to the chief executive measured by provision
of politically convenient, rather than accurate, data?
The latest bit of misinformation is the government's claim last Thursday
of a huge reduction in the fiscal deficit. This was achieved mainly
by counting bond issues as "revenue"!
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