Posted by: bigtalksingapore | April 7, 2011

Singapore election topic: inflation

The whole world is facing threat of massive inflation especially with the increasing unpredictability of climate change and natural disaster.
Tackling this problem is one of the top priorities of Singapore government.
Let’s take a look at current situation.

  • The actual increased in food price in its rawest form may not have the biggest impact to Singapore inflation. This is because most of the foods that we bought are usually repackaged products. For example, the cost of the raw material like pure milk constitutes only a small percentage of the selling price of the final product on the shelf. Majority of the cost comes from marketing, packaging, transportation and rental.

  • With the increased in oil price, it would significantly inflate the cost of most goods. Cost of transportation and packaging material that is highly reliance on oil would increase. With Middle East and North Africa chaotic situation, oil is probably going to stay high for a long time.
  • In an effort to win support for the coming election, Singapore ruling party has implemented drastic Singapore dollar appreciation to curb import prices and inflation. This is the most easiest and effective method to reduce Singapore inflation. In the long term, it is not a good method because the repercussion is a reduction in export competitiveness. As soon as the election is over, Singapore currency appreciation measure will have to stop. When that happens, there is going to be a strong upward pressure for inflation.
  • Singapore dollar is likely to depreciate and inflation will seep in. Singapore government is probably going to implement stronger measures to reduce property price. Property price make up a high portion of consumer price index, this action will push down the increase of CPI and decrease inflation figure. The decrease will look very good on the outside but has little effect on majority of Singaporeans. This is because most Singaporeans have already entered into loan contract to buy their home. Only those in the high income bracket will be smiling because it offer them an opportunity to buy cheapskate property price for investment. Price of consumer product will still inflated and seriously affects most Singaporean (especially those in the lower income level).
  • To further curb inflation, Singapore government may have to increase bank interest rate to tighten money flow. As interest rate increase, property owner will have to pay more to service their housing loan. Some may have to sell their second home. Inflation figure may still look okay but most Singaporeans will be hurt pretty bad.
  • Singapore GDP hit a global high of nearly 15%. The high figure was created with the opening of casino and sky rocketing property price and massive property investment. The effects of casino benefit only a selected group of the rich. Where else the benefit of high property price does not really mean better life for most Singaporean, unless they sell their property for profit taking. There is no way for most Singaporean to do that unless they want to sleep under the over head bridge or switch to renting.

Most Singaporean are feeling very optimistic with the high GDP and seeing their property value appreciate. They are going to be in for a rude shock after the election. Be prepared, be very prepare..

We are going into a global situation of sky rocketing inflation. If China is successful in its switch from being the cheapskate producer to world consumer, the situation will get worse. There is no doubt that we may have to tighten our spending in order to pull through.
Most Singaporean are used to the mindset that Singapore is not a welfare state with little expectation of direct government help. Still I hope that Singapore government will implement more help for its poorer citizen even though election may already be over by then.

I would suggest the following…

  • An enhance GST rebate system for basic essential goods (refer to my blog on https://bigtalksingapore.wordpress.com/2011/03/03/gst-fine-the-way-it-is-says-tharman/)
  • A special committee to be setup with representatives from opposition parties and NGO (Non Governmental Organization). This committee will look into the benefits and negative impact of casino. One of its functions will be to investigate on how to tap the casino effect so that more Singaporeans can enjoy its boom.
  • Utilities cost make up a great portion of Singaporean spending. A “Green Utilities Rebate” system should be setup to offer utilities rebate based on their individual household consumption. For example, let’s say the average monthly electricity consumption for a four room HDB flat is 400kW hours. Assuming that the cost is $0.20 per kW hour. The monthly cost is therefore $80 (400 x 0.2). But if the household manage to decrease their consumption by more than 10%, they get a fee rebate of 10%. That is to say, if their consumption is 350kW hour (10% cut off at 360kW hour), the initial cost being $70 (350 x 0.2) will be reduce to $63 (70-7, 7 being 10% rebate of $70).
  • Rental of wet market and hawker centre play a big part to hawker business cost. It is good that some hawkers signed up to the government movement to not increase price for six months. But the effect of this program can only result in a smaller portion of the hawkers’ dishes at the same price. Even worse is when hawkers resort to lower quality or expired food ingredient. My suggestion is to implement a hawker rental rebate scheme where the hawkers promise to keep price, quantity and quality the same. In return, the government will give real monetary rebate to these hawkers. The rebate should be given to hawker directly, we don’t want to give rebate to stall owners who rent out the stall. The stall owner will most likely keep the rebate for themselves and not benefit the hawkers. This scheme should be re-assessed again after one year .

A very bleak future for most Singaporean ? Don’t like what I wrote here ? I still have to say.
Hopefully America and China economy will improve enough to get us over the coming economic tsunami. Lets play play…I mean pray pray…

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