Inflation
A bane for middle-class
Widespread price increases overshadow Singapore’s prosperity in the last four years. By Seah Chiang Nee.
Nov 3, 2007

THE city-state has been hit by an unceasing bout of price increases that has overshadowed the city’s prosperity in the past four years.

The latest series of price hikes came recently almost days within each other on household necessities like bread, noodle and live chicken (by an average of 20%) – and bus fares by one or two cents.

(This came only a year after fares of buses and trains were raised by one to three cents.)

Hardly had the public time to ponder the impact when the government dropped another bombshell. It substantially raised the Electronic Road Pricing (ERP) rates for the third time this year.

This will hit the pockets of some 800,000 car-owners, not to mention buses and lorries.

Under the system, they are charged electronically every time they use certain stretches of roads and highways during busy hours, according to places and times.

The peak charges will go up on Monday by $1.50 to $5.00 – or 43% at the worst point. Others are slightly cheaper.

Incredibly this is the third time in 2007 that ERP rates are raised, and the public protests have been uncomplimentary and loud.

Inflation is at its worst here in 12 years and has become the people’s biggest worry today. For many, the high costs are blurring the Singapore Dream.

Worst affected is the broad middle class, which is already paying dearly for the high oil price and a punishing five-to-seven per cent rise in the Goods and Services Tax (GST).

Since the beginning of the year, a wide range of products and services – including housing, hospital and medical care, education, electricity – has been skyrocketing.

Hardly a week passes without an announcement or two of some price or government fee going up.

There are two immediate effects. The value of money is dropping by the week, and savings are discouraged since consumer prices are rising faster than interest the banks pay on deposits

Some other recent price hikes:

* Electricity. Costs up by 4% between October and December. In the last quarter, they had been increased by 9%.

* Fees in certain schools up 10%-12%; university fees had been raised earlier. One special needs school doubled its fee.

* Average hospital bills were up by 10% to 30% with subsidised class C wards chalking up the highest percentage increase. Polyclinic charges were also raised.

* Cigarette prices went up by some 40 cents a 20-package to S$11.60, or 3.6%.

There were hikes on cable TV, car insurance, car parking and postal charges, as well as goods from milk to Milo, cooking oil to coffee, canned foods, processed foods, wheat products – and many other items at supermarkets.

The government appears unable to take action to stop the epidemic, a contrast to the first-generation government during such crises.

It launched NTUC Fairprice in 1973, a workers’ cooperative, to stem out profiteering on rice and other necessities.

And ministers and parliamentarians at the time would move around marketplaces and shops, appealing to shopkeepers to be sensitive to people’s financial needs.

Like previous inflationary times, this one is largely imported, the result of higher oil and other imported products.

The second cause is a robust Singapore economy, which has been growing at an average of 7.6% a year since 2004. This year 8% is expected. It creates demand.

Business has been relatively strong, salaries have risen (civil servants just got a 6% pay hike) and unemployment is the lowest in 10 years.

But so strong and persistent is inflation that many Singaporeans feel they are the poorer for it.

Part of the cause is the government, whose priorities are economic growth and asset accumulation (for foreign investments) – even at the expense of a higher cost of living.

To that end, it has increased GST from five to seven per cent and may eventually reach 10 per cent. Fees for public services are being raised to ensure no drop in Treasury collection.

Deficit budget, although not entirely unknown in Singapore, is a very rare happening.

Many young professionals who just start off in life are worried that the sharp run-up in property prices (a boon for 85% homeowners) has made it virtually impossible for them to buy a flat.

Some are putting off marriage or raising children.

The people see high prices as being here to stay – a new feature of life in a fast over-crowding city that wants to see a population of seven million.

Mr Lee Kuan Yew has said that Singapore is not only a developed country, but occupies ‘the top half’ of the First World.

Keeping it there not only brings wealth but also a new painful structure of expensive living comparable to the likes of Paris and Tokyo.

Understandably inflation has become a hot debate subject.

Blogger ‘Raul77’ points out that Singapore has neither land-size nor natural resources, so “it can either be a 1st World country or a poor one. No third way about it.”

As a result, life is always stressful, and those who can’t take it are leaving for quieter, bigger countries.

This is tough for the middle class and working class, which are just struggling for a living amidst the perceived wealth, unhappy and with few choices in life.

To which Nornan Lee replies: “If Singapore is not worth living, then nowhere is worth living.”

(This article was published in The Star, Malaysia on Nov 3, 2007)