I now give an account of the 2007-08 outturn.
Thanks to the continued economic upturn in 2007, and our successful efforts to contain operating expenditure over the past few years, the
Government's finances for 2007-08 are in very good shape.
I estimate that operating expenditure for 2007-08 will be $206.4 billion, an increase of 6.4 per cent over 2006-07.
Against the background of a 6.3 per cent GDP growth in 2007, my updated estimate for operating revenue for 2007-08 is $270.1 billion, an increase of $48.7 billion over the original estimates. The main items that brought in higher-than-expected revenues were stamp duty on stock transfers which generated $35 billion ($22.1 billion higher than the original estimates), stamp duty on property transactions which generated $14.6 billion ($5.1 billion higher), profits tax which generated $89 billion ($11.5 billion higher) and salaries tax which generated $37 billion ($7 billion higher).
For capital revenue, land premium for 2007-08 is estimated at $63.1 billion. We estimate that the revenues from land premium and stamp duties together will account for about one-third of total government revenue for 2007-08. This is the highest contribution that these relatively less stable revenue sources have made to total government income since 1997-98.
Since 1 April 2007, in order to reduce volatility in investment income, the investment return on the fiscal reserves has been calculated on the basis of the average rate of return of the Exchange
Fund's investment portfolio over the previous six years. The investment income on the fiscal reserves for 2007-08 is estimated at $27.9 billion.
The revised overall expenditure on infrastructure for 2007-08 is $20.5 billion, which, as the Chief Executive has pointed out in his Policy Address, is the lowest in recent years. The main reason for the decrease in expenditure is that there are not enough infrastructure projects, especially major ones, ready for implementation. I believe that expenditure on infrastructure has bottomed out. It will rise to $21.8 billion next year and increase further in the years ahead. This will help create more job opportunities.
Overall, I forecast a surplus of $63.7 billion in the Operating Account for 2007-08. For the Consolidated Account, I forecast a surplus of $115.6 billion, which is an all-time high. This is four and a half times last
year's forecast and is equivalent to 7.2 per cent of our GDP. By 31 March this year, our fiscal reserves will have increased to $484.9 billion.
This forecast outturn is somewhat higher than that predicted at the beginning of last year. I understand well what the former U.S. Federal Reserve Board chairman Alan Greenspan meant when he said last year that while he had been forecasting economic changes for 50 years he had not seen any improvement in his ability as a forecaster. I am not going to pledge to do better than him in forecasting. I have focused on how to use the happily favourable outturn this year to address present needs and to put us on a more secure footing to meet