Sunday, May 04, 2008

Inflation Cause and Effect.

Singapore's inflation rate is double that of Malaysia, it is higher than Hong Kong and Australia. While inflation is generally higher around the world, Singapore's inflation is far higher than the average for several reasons, here are the main ones:
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  • One mllion people added to our population in recent years causing the population to rise from 3.7M to 4.6M
  • An overheated economy that grew by 7% per annum.
  • GST hike, transport hike, utilities hike, kindergarden fee hike etc etc.

Growing the population to 6+M and fast GDP growth are both established goals of the PAP govt. Singapore has the highest influx of people per capita in the world, our import of foreign workers is not some kind of scheme to supplement locals, it is an all out aggressive effort to bring in workers to fuel GDP growth. No other country, except for a handful of oil rich middle eastern state that ensures its indigenous population sits comfortably on top of imported labor, even come remotely close. Singapore is a very special country - our esteemed PM told us on May Day that the foreign workers create jobs for Singaporeans - we are dependent on imported labor in a way that no other country is. The large number has cause strains to appear in our housing, transport and healthcare. The govt's method of relieving the strains is to hike prices - cannot find taxis during peak hours, hike taxi fares...congestion? raise the ERP...long queues at hospitals, increase fees.

I would like to urge my fellow Singaporeans not to worry about inflation because our govt is on top of everything. They have your interests in their hearts and are bringing more foreign workers to create even more jobs for you. Don't worry there will be so many jobs around you can work 2 jobs, one during the weekdays and the other on weekends so that you can afford those price hikes.

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Coping with rising prices and high cost of living
INSIGHT DOWN SOUTHBY SEAH CHIANG NEE
Singapore’s annual inflation rate was at 6.7% in March – the highest since 1982 – and the republic is now paying a high price in becoming a global city of fine living.
HOW are Singaporeans, South-East Asia’s wealthiest people, coping with the city state’s worst inflation in 26 years?
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On the streets and in homes, skyrocketing prices are shaping up into a terrible nightmare that is eating into their income, their savings and even their confidence.
Hardly a week passes without news of one price rise or another, with each increase seemingly begetting another. And on the horizon is the prospect of a deep global recession.
For a generation, with inflation generally hovering around 2%, Singaporeans have never experienced this sort of crazy price increases.
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Kindergartens run by the ruling People’s Action Party were the latest to raise fees (by 30%-100%), joining schools and universities.
Earlier, cinemas increased the price of a ticket by 50 cents and S$1 (RM1.17 and RM2.34), making movies a luxury item for many Singaporeans. A weekend outing for a family of four now costs between S$40 and S$43 (RM93 and RM100).
Singapore’s annual inflation rate was at 6.7% in March, the highest since 1982, a figure more than double that of Malaysia – and higher than those of Hong Kong and Australia.
Rice and petrol prices at the pump – as well as the cost of driving on the road – have gone up beyond recognition.



If you can name it, whether a product or a service, it’s likely that they’ve raised the price – electricity, milk, coffee and sugar down to the cost of postage.
Living in a small island which has to import its food, oil and natural resources has put Singaporeans these days in a spot, worse than for most others.
The middle class (average monthly income: S$2,800 or RM6,560) and the low-income are taking it on the chin. In some ways, the Singaporean Dream is being blurred.
Inflation is, however, not entirely imported. In fact, government policies have a great deal to do with it since it raised the Goods and Services Tax (GST) from 5% to 7% last July.
In quick order, it also raised the cost of services – from buses, MRT and taxis to hospitals and schools.
Drivers are now charged more often and more regularly when they drive on certain road at peak hours.
The ill-timed GST increase was the trigger point, but it wasn’t the main reason.
The two biggest factors that pushed up inflation are:

  • A strong overheating economy that grew by 7% annually for the past four years; and,
  • An open door immigration (the highest inflow rate in the world) that brought in a million foreigners and pushed the population to about 4.7 million.

The republic is paying a high price for becoming a global city of fine living comparable to the likes of Paris, New York or Tokyo. It has created something more than high inflation: A permanent high-cost structure – from property to taxi fares and restaurants.
To be a London or a Brussels would mean having to live with their high costs.
People are responding in different ways. I know of several young graduates who have just started working, moving back to live with their parents to save on expenses.


Mr and Mrs Singapore are going out or eating out less, buying fewer luxuries, including cars, and reducing the use of taxis. There are social costs to all these.
My wife and I no longer go out very often on weekends. Every time we do so, we feel the pinch,” said a young salesman who had just got married. “Having children? Not now. We can hardly feed ourselves.”

Nine in 10 people polled by the Sunday Times now find Singapore an expensive place to live in.
While eating at a food court recently, I sat next to a couple in their 20s sharing a lunch – a plate of mee goreng and one bottle of orange squash.
On another time, I saw a Bangladesh worker lunching with just a can of black coffee and a large loaf of plain bread.

For some like Janice Tan, 35, who works at a travel agency, the soaring prices have forced members of her family to shower only once a day to cut down their water bill.
She told a reporter that water (which is also dearer) used to rinse vegetables is also now recycled to flush the toilet.
“Except for the ultra-rich, the impact of the sharp price increases has cut across social classes in one of Asia’s wealthiest nations,” wrote a foreign correspondent.
Charities are offering free food to the needy – a page from America’s soup kitchens – and the queues are getting longer. More people are also approaching community bodies for help to make ends meet.
A government website is listing food stalls that offer S$2 (RM4.68) meals. The most popular dish that I know of: Vegetable economical mee hoon at S$1.60 (RM3.75).
The government has just dished out cash averaging S$1,000-S$2,000 (RM2,340-RM4,680) (as well as top-ups in mandatory savings) to each family, depending on its size, age and poverty level.

The complaints are loudest from the middle class, with some people questioning whether Singapore is still a good place to live in.
Inflation has made them worried about savings, family life and old age.
Aret says “it’s not a place for dreamers”. Another added that after 10 years of struggling, “I am very tired and stressed”.
But others are more optimistic, believing the problems are largely global, and as the world picks itself up, so will Singapore.
To those who say Singapore is not a good place to live in, he said: “If it is so, then nowhere else is a good place.”

21 comments:

Anonymous said...

It does make my blood boil when Minister Gan Kim Yong says that in our tripartite pay discussion, we should not adjust salary to help manage our inflation, that Lim Swee Say will not allow Singapore to 'take the easy way out', and we will continue to allow more cheap China workers (forget about foreign 'talent' for now) to work here to save our employers and kopi tiam owners.

In the economic cycle which I learn in econs 101 - after economic growth, inflation, high salaries are supposed to come in to control the overheating economy.

Singapore ministers, in trying to prop up their variable bonus pegged to GDP, will not allow our lower income salaries to rise. They will rather import Cheap China Workers to keep the economy growing. We are so lucky.

We will have to wait a couple more years to see the social impact of this decision, but I think we all can guess already -
Actually there is no way out but to jump onto the MRT tracks.

Sri said...

I think you guys are going to be in for a rough ride. I used to be one of the "foreign talent" and lived in Singapore as an expat for 6 years. I quit to come back to India even though life was great in Singapore because I did not want my kids to grow up in too much comfort.

Lucky - you might want to do a small write up on Peak Oil on your blog. It is going to hit all of us hard - and Singapore really hard. When your milk and juice come from Australia and rice from Thailand (which will soon cut exports), you know what you're in for.

A lot of people think that new technology will save us. No evidence so far that new technology is scalable to replace even 20% of today's oil requirement.

Singapore is a high per-capita energy country and all your electricity is gas based. Don't be surprised if power goes up to 40c/kWh.

Best Wishes
Sri

Anonymous said...

Complain and whine all you like.

At the end of the day, you will still vote for Pay-and-Pay.

I bet my last $1.07 that you will not vote for the opposition still.

Serve you right!

LuckySingaporean said...

Sri,

I do not believe in the peak oil theory. Peak rice? Peak Steel? Peak copper?

Your govt stated in a report recently that it is able to buy an oil field and start pumping out oil for 40 per barrel and that the rise in oil price is due to speculation. We will know if the "bubble is a real bubble" only when oil gets back to $60 per barrel. Already the consumption in US has fallen 5% and if govt around the world remove their fuel subsidy which is cause over consumption, we will see prices getting moderated.

I'm not an expert in oil but prices of necessities can be pushed up in the short term and held there because the supply cannot be increased instantly and consumption does not fall instantly due to habits. If I have enough money I can push up the price of potatoes tomorrow even though there is no real shortage it will stay there for a while.

Alex Au of www.yawningbread.org has written a piece on the rise of prices of commodities. I generally agree with what he said.

Sri said...

Lucky,

We can agree to disagree on this one. Time will tell. Peak oil does not mean we will run out - just that the days of cheap oil are numbered.

Check global oil production -it has remained static at about 85mpbd over the last 3 years even as oil has climbed from $35 to $115.

OPEC no longer talks of $35 or $40 as the right price. They talk of cutting production when oil goes below $90

Peak rice/peak wheat is not as far fetched when so much oil goes into fertilizer - prices of fertilizer have tripled.

I know this is not a blog on peak oil - but your inflation is not disconnected with oil prices. There were reports of butter and cheese shortage in Japan - btw.

Not sure why you would take my government's word for anything :)

Sri

Anonymous said...

SHAME ON YOU, LUCKY TAN!
How dare you quote an article from a source less reputable than our very own Straits Times? You have warned us that we should read the Straits Times to stay happy, and you should live by what you say.

It is very irresponsible of you to quote misleading information from less reputable sources you have warned us against!

Lucky Tan, I demand that you withdraw this crappy article right now! Like you say, only the straits times tells us the right things, and you should stick to reporting articles from our straits times!

LuckySingaporean said...

anon 5.01PM,

The only reason Seah Chiang Nee is credible is he was the Foreign Editor of Straits Times from 1974 to 1982.

He has to be a good man otherwise he wouldn't have lasted 8 years in Straits Times.

Anonymous said...

Whoopee higher price for everyone and India/China Hoarding rice and foodstuff.
Sri I'm worried for you why quit kulicke soffress and go back? Tak boleh tahan is it?
Thailand is increasing rice planting from 2/3 time per year to 5 times per year You don't know meh?
Trust a neh to kpkb and say sour grapes are turn tail and run back when thing get tough

Anonymous said...

Hi Lucky, you pointed out Singapore's inflation higher than HK, if that is true (I didn't confirm this) this is intriguing...

HK has a dollar peg, that means effectively its monetary policy is controlled by the Fed, and in effect, its inflation should go in tandem.

HK like us import basic necessities, again this should mirror a rise in somethings like our CPI. And given the crazy inflation seen in China, I would have thought HK is in a worst predicament.

Then again, unlike HK, SG lax immigration import cheap labour, that is counter to rising cost, hence counter to rising inflation. And of course inflation isn't discriminatory, so everyone who smelled it have to deal with it.

So why is this? Minus the global phenomenon, 99.9% inflation is the creation of the PAP Gahmen mismanagement and cronyism, they have been complacent, pandering commercial interest, supplanted the welfare of ordinary citizen when they had the means in governance to prevent rising cost.

Going by how Temasek and GIC invested CPF money, evidently they had misread the economic climate and set the wrong course. The action taken now look more like a handbrake turn.

Anonymous said...

someone should dig into the mess that is the formula one organization. You would be surprised to hear that 4 months or so before the GP, there are huge problems and issues especially the governement, singtel, pub and other companies, due mainly to the stupidity arrogance and we-don't-know-but-we-don't-want-to loose-face attitude of some bureaucrats in this screwed up country!

Anonymous said...

We only know about the poor take-up rate of hotel bookings and that was because the hotels themselves let out the story. Are they covering up other problems, like how to board up certain buildings etc and whether the building owners will agree and how that will affect businesses.

Remember, they were also forecasting rosy sales for shops in Suntec and surroundings before convening the (was it) IMF/WTO meeting here sometime ago, but all the rosy forecast turned into dust. The shops are left with the shit business during that period.

This time round I believe there are still suckers believing their spin.

Onlooker said...

Now We must Compare that to our minister INFLATED EGO. (hint increase pay when renumeration goes south even for American CEOs)
And price inflation doesn't look so bad after all.
Bite the bullet, hit the dust, die also must wait till 85(annuities).
Curious Everyone in Singapore including FT eat air flown seafood from japan meh?

yamizi said...

anon @ 7:09pm,

That previous mistaken rosy sales was greatly attributed to the tight security checks in entering into suntec premises as there were many foreign delegates.

I'm more interesting to see by sealing up the roads for the F1 thingy, what kind of traffic jam or indirect traffic issues would occur?

While the elite, rich and the foreigners (belonging to both elite and rich) cheering on the night race, how many would have understand this is only a facade of this society which its social caste is beginning to take into formation?

CH said...

Singapore is exp live in? prob not bah... it's jus tt there r some of us who r not working hard enough to live the singapore dream...i'm 27, so r my frens, they dine at goodwood park hotel and places like mortens or sumthing. Obviously i've not been there before, i dun even know where they are. So i conclude i must have not been working as hard as my peers and it's therefore entirely my fault. But i have other commitments like looking out for dangerous people...so how? Anyway , i think i dun fare too badly.. at least i dun have to share my lunch with my girlfriend at the foodcourt. But we did share a can of coke.. I shall work harder to buy a can for each of us next time...

Anonymous said...

Interesting article in the ST forum pages today. How Seah Kian Peng and NTUC was caught with their fingers in the pie - trying to raise the price of rice for the union workers while they stilll have 6 month stock of rice. And telling people not to stock up on rice cos there is enough, but not doing anything to delay the price hike while they still have old stock bought at old price!
#$%# That is profiteering by any standard, and if you are a union cooperative, that is really shameful. NTUC should have the lowest prices for all goods and services if it aims to be for the workers, not just some 120 items.
The fact that NTUC intends to set up a cheap price store in future, very clearly shows that their Fairprice is NOT FAIR .....duh...

Anonymous said...

Does anyone know how our wages compare in regards to cost of living. I know Singapore is the third most expensive place to live but is our wages the third highest in the world (Actually is might be if you factor in the Ministers pay, which is the highest in the world). Anyone?

Anonymous said...

since everyone is so unhappy and poor, why not cancel f1 and IR?

Anonymous said...

Since everyone in china want to boycott US/france/japan/korean goods.
Why not ban them from Beijing Olympics?
Why don't ban Taiwan from Olympics?
.. It's the people on top who want it.
To Anon above it's called Mian Zi and they want to appear Da Fang.
Side Shanghai also build race track for next year one.
The only loser is the lousy senpang track.

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