Majority of S'poreans 'will not be directly affected by inflation'
by Cheow Xin Yi
SINGAPORE - Headline inflation is expected to remain at 5 per cent for the next few months but the majority of Singaporean households will not be directly affected, said Trade and Industry Minister Lim Hng Kiang in Parliament yesterday.
This is because inflation is largely driven by imputed rentals from owner-occupied accommodation and car prices, and most Singaporean households own their own homes while new car buyers are in the minority, said Mr Lim.
However, analysts Today spoke to disagreed, citing spillover effects from these two components into other costs households and businesses face.
Mr Lim, who was responding to Members of Parliament (MPs) concerned about inflation, had highlighted a "slightly positive note" this year: Unlike in 2008, when food prices rose 8 per cent due to weather events and a global supply shortage, recent food price inflation has been lower.
Last year, food price rose by 3.1 per cent and in February and March this year, food prices remained at below 3 per cent. he said.
However, CIMB-GK Research economist Song Seng Wun pointed out that the average Singaporean will still feel the weight of inflation, as businesses facing spiralling costs pass that on to consumers.
The tight labour market has pushed wages up, while rentals for commercial properties have only eased recently, resulting in higher business costs, he said.
"So when you go see a doctor at a clinic, or send your kids to a tuition centre, you notice you pay a little more," said Mr Song.
OCBC economist Selena Ling agreed, noting the logistics sector has been hit by higher transport costs, which are passed on to customers across a wide range of sectors.
"It may be true to say COE (Certificate of Entitlement) premiums doesn't affect most Singaporeans, but there's a second and third round effect," she said.
The Government would need to continue to create jobs and ensure wage growth to help the middle-income group keep pace with inflation, she said.
In Parliament, Mr Lim said the Government recognises that the rate of inflation is still higher than what was experienced historically and reiterated it was committed to help cushion the impact on households, such as through the U-Save rebates, which help to offset utility bills.
While MPs yesterday questioned if the Government could review its taxes and fees to address rising costs, Minister of State for Finance Josephine Teo sought to put its impact on inflation "in perspective".
While headline inflation has increased 5.2 per cent over the past one year, government fees and charges accounted for 0.1 percentage points of inflation in March, she said. COEs, meanwhile, contributed 1.2 percentage points.
Acknowledging that a main cost driver has been the recent increases in the foreign worker levy, Mrs Teo reiterated that increases are necessary to manage Singapore's dependence on foreign workers and support economic restructuring.
by Cheow Xin Yi
SINGAPORE - Headline inflation is expected to remain at 5 per cent for the next few months but the majority of Singaporean households will not be directly affected, said Trade and Industry Minister Lim Hng Kiang in Parliament yesterday.
This is because inflation is largely driven by imputed rentals from owner-occupied accommodation and car prices, and most Singaporean households own their own homes while new car buyers are in the minority, said Mr Lim.
However, analysts Today spoke to disagreed, citing spillover effects from these two components into other costs households and businesses face.
Mr Lim, who was responding to Members of Parliament (MPs) concerned about inflation, had highlighted a "slightly positive note" this year: Unlike in 2008, when food prices rose 8 per cent due to weather events and a global supply shortage, recent food price inflation has been lower.
Last year, food price rose by 3.1 per cent and in February and March this year, food prices remained at below 3 per cent. he said.
However, CIMB-GK Research economist Song Seng Wun pointed out that the average Singaporean will still feel the weight of inflation, as businesses facing spiralling costs pass that on to consumers.
The tight labour market has pushed wages up, while rentals for commercial properties have only eased recently, resulting in higher business costs, he said.
"So when you go see a doctor at a clinic, or send your kids to a tuition centre, you notice you pay a little more," said Mr Song.
OCBC economist Selena Ling agreed, noting the logistics sector has been hit by higher transport costs, which are passed on to customers across a wide range of sectors.
"It may be true to say COE (Certificate of Entitlement) premiums doesn't affect most Singaporeans, but there's a second and third round effect," she said.
The Government would need to continue to create jobs and ensure wage growth to help the middle-income group keep pace with inflation, she said.
In Parliament, Mr Lim said the Government recognises that the rate of inflation is still higher than what was experienced historically and reiterated it was committed to help cushion the impact on households, such as through the U-Save rebates, which help to offset utility bills.
While MPs yesterday questioned if the Government could review its taxes and fees to address rising costs, Minister of State for Finance Josephine Teo sought to put its impact on inflation "in perspective".
While headline inflation has increased 5.2 per cent over the past one year, government fees and charges accounted for 0.1 percentage points of inflation in March, she said. COEs, meanwhile, contributed 1.2 percentage points.
Acknowledging that a main cost driver has been the recent increases in the foreign worker levy, Mrs Teo reiterated that increases are necessary to manage Singapore's dependence on foreign workers and support economic restructuring.
