High Food and Petrol prices solely due to external forces?

HyperFocal SG

http://antineodem.wordpress.com/2008/02/12/high-food-and-petrol-prices-solely-due-to-external-forces-

High Food and Petrol prices solely due to external forces? - Accountability in the media
February 12, 2008

Quote of the day from Channelnewsasia article titled “Budget to mitigate high food prices and inflation”:

“These [the topics discussed on the Budget 2008 webstie] include high oil and food prices, caused by factors outside of Singapore’s borders. “

In the context of the article, the CNA article seemed to try to replicate exactly what the government wanted to them to say, without considering the larger picture at work. Most Singaporeans would probably understand that the hike in food prices could be attributed to both external and internal sources. Externally, it is true that both global fuel prices as well as food supply in Malaysia are factors in the rise and fall of petrol and food prices in Singapore. Yet, internal factors such as government policy and probable lack of strong bite from consumer advocacy groups play their parts too. The hike in GST from 5% to 7%, which is inherently regressive, has had an effect on the raising of prices of raw imported materials, from noodles to minced meat to vegetables. In addition, the rent of the foodcourt stalls might have increased due to the increase cost in providing air-condition, cable television and dish washing in the foodcourt due to the increase in GST. This means that your favorite fish ball noodles in the food court might have ramped up its prices to 3.50 dollars to 4 dollars due to the rise of GST, both directly and indirectly.

For petrol, Shell Singapore website has clearly answered the question in their Q & A session

“What taxes are applied to fuel?

Petrol - Excise tax of 44cpl is applied on every litre of petrol. GST is applied to all fuels (petrol and diesel) as it is purchased at the retail station.”

It is just strange to me that CNA had to include this sentence at all, which gives a rather distorted picture of the rising food and petrol prices. Would the article be worse off without that sentence? It is very heartening that the government is going to assist Singaporeans with this rising food and petrol costs in the upcoming budget. But did Wong Mun Wai from CNA had to do this additional (seemingly unneeded) P-R work for the government?

maurizio13 SG

When the economy is good, P4P will claim credit for it, with no regards for external forces.

When economy is bad, P4P will claim that it is due to external forces beyond their control.

Frankly, the current inflation and prices increases is due to the 7% GST.

Oil prices were already on the extreme high years before, but prices of necessities remained more or less stable.

The increase in price of crude oil is partially due to the weakening of the US dollar (as crude oil is normally quoted in US dollar per barrel). But the Singapore dollar has strengthened against the US dollar from SGD 1.72 per USD 1.00, to 1.42 per USD 1.00 in the past few years.

After the 7% GST increase, prices of necessities just took off.

kramnave SG

When the economy is good, P4P will claim credit for it, with no regards for external forces.

When economy is bad, P4P will claim that the bad economy is due to external forces.

Frankly, the current inflation and prices increases is due to the 7% GST.

Oil prices were already on the extreme high years before, but prices of necessities remained more or less stable.

After the 7% GST increase, prices of necessities just took off.

That would mean that the rise in global commodity prices is due to our GST..which doesn't make sense.

phil30k SG

The stronger the Singapore dollar is, the cheaper foreign goods are. Potentially you see more foreign goods available, not necessarily an increase in their prices.

Inflation is the situation where there is too much money in the market. Symptoms include rising prices. GST increase does not cause inflation, just raises prices, not to be confused with inflation. In the case of a market with inflaction, the rising prices does not cause spending to decrease. However in the case of GST, spending can be expected to decrease.

A GST hike accompanied by a lowering of import taxes may not cause an increase of imported good's prices. It's important to know if import taxes were reduced or if changes in other relevant policies occurred concurrently.

I hope that clarifies things somewhat.

Shotgun SG

I thought the inflation was largely attributed to the high oil prices?

And strangely, oil dipped a lil lately possibly due to a weakening US economy that reduced the demand for oil from the US. Still, oil is hanging on the high side, and is not likely to drop drastically in the near future.

I do agree with that the GST hike causes "artificial" inflation. Goods that used to cost $3.50 now costs $4.00 due to the 2% increase . Unfortunately, the Government doesn't seem keen to clamp down on these merchants as it seems to be an "across the board" phenomenon. For a burger to up 50cts due to a 2% increase means I probably paid $25 for my burger previously...

qlqq9 SG

The GST hike also contributes to the increase in food prices. So I think PAP should admit it that it is partly because sickening hopeless lhl is responsible for the hike. Increase GST to 2% to help the poor is his excuse, what crap!

maurizio13 SG

The stronger the Singapore dollar is, the cheaper foreign goods are. Potentially you see more foreign goods available, not necessarily an increase in their prices.

I hope that clarifies things somewhat.

Inflation is an overall increase in prices or a loss in purchasing power. One dollar in 1960s can buy you many bowls of noodles, one dollar these days can't even buy you a bowl of noodles, that's inflation.

If say a bowl of noodles once cost $1.00, but say with an increase in 10% GST. The same bowl of noodles now cost $1.10, the cost of the noodles after GST has been inflated by $0.10.

"A simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money".

In other words, Price Inflation is when prices get higher or it takes more money to buy the same item.

Inflation is measured by the Bureau of Labor Statistics in the United States using the Consumer Price Index. "

If you say foreign goods should be cheaper, then why are our cost of living increasing?

Inflation is not always necessarily a monetary phenomena. Supply shocks (reduction in supply) or demand shocks (increase in demand) can also cause price levels to change.

Huh?

Price increases is not inflation?

Maybe you can elaborate further?

Maybe you can elaborate what type of import taxes were reduced?

I hope this sheds more light on the topic of inflation.

maurizio13 SG

The stronger the Singapore dollar is, the cheaper foreign goods are. Potentially you see more foreign goods available, not necessarily an increase in their prices.

I hope that clarifies things somewhat.

double post

phil30k SG

If say a bowl of noodles once cost $1.00, but say with an increase in 10% GST. The same bowl of noodles now cost $1.10, the cost of the noodles after GST has been inflated by $0.10.

"A simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money".

In other words, Price Inflation is when prices get higher or it takes more money to buy the same item.

Inflation is measured by the Bureau of Labor Statistics in the United States using the Consumer Price Index. "

If you say foreign goods should be cheaper, then why are our cost of living increasing?

Inflation is not always necessarily a monetary phenomena. Supply shocks (reduction in supply) or demand shocks (increase in demand) can also cause price levels to change.

Huh?

Price increases is not inflation?

Maybe you can elaborate further?

Maybe you can elaborate what type of import taxes were reduced?

I hope this sheds more light on the topic of inflation.

Thanks Maurizio13 for your educated response.

I think the perception of inflation has been confused mostly because it has been frequently taken out of context. Inflation should be viewed in the context of a free market economy (not a regulated one) and in such a context, inflation is considered good. The printing of unbacked currency has made inflation as a standard of measuring economic development meaningless.

The points you raise actually argue that the price increases we experience are not completely inflationary in nature as we don't seem to be enjoying its benefits.

The problem arises when prices are artifically raised and then the raised prices are described as the effects of inflation. This gives people the illusion that the economy is developing when all that is happening is that prices have been artificially manipulated.

I don't know if import taxes were reduced.