Inflation
Heads for a higher plane
Global Singapore slowly takes on new cost structure of other
advanced cities. By Seah Chiang Nee, littlespeck.com
May 12, 2007
FOR reasons that are both foreign and domestic, people are gearing
themselves for a surge in their cost of living this year.
Some are fearful that Singapores transformation into a global,
wealthy hub with millions of foreigners heralds a new era of
expensive living, just like Paris or Tokyo.
For now, the major public concern is a rise in the Goods and
Services Tax (GST) from 5% to 7% in July, which is likely to
exacerbate the series of worrying price increases over the past
year.
This contrasts sharply with sanguine government statistics in the
Consumer Price Index (CPI), which show prices remaining low and
under control.
However, like in other modern countries, there is a public
perception that inflation is actually higher than reflected in the
official figures.
Singapores index follows world standards, but even in Britain,
many households polled in a newspaper believe that the real cost of
living is four times the governments published rate.
Economists have projected the CPI this year to be around 0.8%, the
average of the past seven years, but others are more
pessimistic.
Since general elections a year ago, the government has announced a
number of increases, ranging from big items like healthcare, public
transport and electricity to less significant ones like postage
rates.
A sample of recent headlines:
* An increase of 1.7% in bus and train fares.
* Private doctors can now set their own fees, instead of referring
to established guidelines. Beware spike in doctors fees warns a
newspaper editorial. Architects to ask for similar treatment.
* Government hospitals raise charges for in- and out-patients by 4%
to 43%. Fees at community polyclinics follow.
* Surge of 20% for car parking in Central Business District.
The GST increase will affect most things, from cars to carpets, and
from TV sets to table-fans sold in supermarkets, as well as
shopping malls, restaurants, and any outlet with annual sales
exceeding S$1mil (RM2.2mil).
Indirectly, the ripple effect will be wide since businesses will
probably pass on the higher operating costs to customers.
Traditionally, because of its reliance on the world for most of its
necessities, especially oil and gas, this city has always been
vulnerable to imported inflation.
No one, however, expects the CPI to reach anywhere near its
historical high of 22.3% recorded in 1974, when the price of oil
quadrupled.
However, todays global Singapore with hundreds of billions of
foreign dollars and a million foreigners is slowly taking on a
new cost structure similar to other rich cosmopolitan
societies.
In line with high-cost European cities like Brussels and Bonn, some
restaurants in Singapore have begun charging customers for drinking
water.
Recently, a friend had a normal meal for a family of nine at a
Chinese restaurant and was shocked at the bill S$940
(RM2,100).
The menu had no price listings, and we had no idea, he
complained.
At least, it didnt charge him for the birthday cake he brought
there to celebrate his grandmothers birthday.
Rich lifestyles, of course, are being blamed as the chief culprit,
but that is not the whole truth.
Other causes are Singapores embrace of high technology, computers
and hand-held gadgets, once luxuries, but now considered
necessities. Software and upgrading are all adding their way to
everyones life.
Making matters worse is frequent media hype about a flourishing
economy and rising demands (in stocks and property).
They create an exaggerated concept that Singapore has become as
rich as New York or London, so businessmen charge
accordingly.
Rents in commercial and private residences, for example, have
jumped by as much as 70% in premium areas.
The 60% pay rise (over two years) for Cabinet ministers has also
exerted a powerful influence on the inflation scene in
Singapore.
There seems to be a growing preoccupation with profits and a belief
that cost increases are an inevitable regular process, irrespective
of need.
A transport minister once explained why trains and buses were
increasing charges when they were reporting large profits.
It is better to stagger the increases regularly rather than in one
big jump over a longer time, he said.
Some businesses carry it to a ridiculous extent. Recently, a woman
wrote to the press to complain that when she asked a food kiosk for
water to make powdered milk to feed her baby, she was charged 50
cents (RM1.10) to fill the bottle.
Economists who believe Singapore will enter a high inflation regime
say the worst hit will be the poorest.
In the first half of last year, prices rose by 1.3%, but for the
bottom 20% it was 2.2%. For the top 20% wage earners, inflation was
only 0.7%.
Nevertheless, some fundamentals serve to reduce the cost of living:
a strong currency and cheaper foreign manpower costs.
More important is the cheap, clean way of eating out at the
numerous hawker centres and coffeeshops that dot the island. They
help the ordinary people keep their daily budget lower than that of
their counterparts in other global cities.
A worker can have a simple lunch or dinner for between S$4 and S$6
(RM9 and RM13.50). For 40 years, this has made costs more bearable
for Singaporeans and visitors alike but not many are betting that
it will last.
The press recently published a number of reports about how
profitable the hawker business is. This has fed speculation that it
may be the prelude to a sharp rental rise.
i couldn't agree any less with seah that 'There seems to be a
growing preoccupation with profits and a belief that cost increases
are an inevitable regular process, irrespective of need.'
