Price increases - No sweat
Prices A relentless spiral Creeping pre-GST price hikes lighten the pockets of Singaporeans. By Seah Chiang Nee. Jun 16, 2007 MIDDLE class Singaporeans are being weighed down by rising costs of daily necessities that seem to show no sign of abatement. Hardly a week passes without a report or two of some service or bread-and-butter item becoming more expensive and biting into people’s fixed incomes. The surge started with condos (one that cost S$1mil or RM2.2 a year ago is now S$1.3mil or RM2.9) and cars, moving to the MRT, buses, taxis, hospitals, polyclinics, mail and utilities. The latest one hit some 750,000 households who subscribe to cable TV. They will soon have to pay S$4 more for the Basic Package – and a whooping S$15 (up from S$5) for the sports channels that televise English football. This has got soccer fans hopping mad with some threatening to cancel subscription, an unlikely solution since cable television is a monopoly run by a single operator. It is also the most important source of entertainment for the Singapore family, which is embittered at the arbitrary hike and the absence of a market alternative. In recent weeks, inflation worsened as merchants jumped into the bandwagon, hiking prices in restaurants, supermarkets, food courts, coffee shops and retail outlets. This affects the budget of every Singaporean but the hardest hit are the middle class and lower-income workers. To put it in perspective, not all shops everywhere are doing it and those that do are not raising prices for every single item in their premises. It is a sporadic, selective practice that depends on the person and the location. Some are reluctant to charge more for fear of losing customers. A stall near my home has just hiked his nasi lemak and mee rebus from S$2 to S$2.20. Across the road, a glass of sugar cane water is up 20 cents to S$1.20. In some places – but not all – chicken rice, the closest to a national dish here, now costs 50 cents more at S$3.50. Condensed milk, bubble tea and Campbell soup have become dearer. For consumers, the worst is to come. On July 1, Singaporeans will have to pay a higher Goods and Services Tax (GST) when it is increased from 5 to 7%. “The price increases look unstoppable and the government is either unable or unwilling to take action to deal with it,” said a retired teacher. In the government’s view, inflation here is largely imported or due to globalisation and represents only an insignificant rise in the Consumer Price Index. The only watchdog, the Consumers Association of Singapore (CASE), has been a relative bystander especially when the perpetrator is the government or a Temasek-linked company. Inflation is not only a Singaporean phenomenon. It is also threatening stronger economies like the US and China, which are considering higher interest rates to dampen it. With an expected growth of 6% this year, Singapore is not spared. But the government’s strong business role and preoccupation with the bottom line are part of the dilemma. There are other official causes. Firstly, the authorities themselves had started the ball rolling when they raised charges for public services like education, hospitals and utilities. Secondly, the government is Singapore’s biggest landowner, owning some 70% of it and thus has a powerful say on prices. Rents in Temasek-controlled commercial and shopping properties have risen significantly. The impact on the retail trade is inevitable. In addition some of these linked companies operate a total or near-monopoly services that limit market competition. “Monopolistic price increases have happened all too often,” a commentator of current affairs observed. “It is time the ministers form a committee to look into government monopoly or cartel collusion to fix prices to ensure there is no infringement of the Fair Trading Act”. What is more worrying is structural inflation. As it speeds towards becoming into a global city with a large number of rich and talented foreigners, Singapore would likely take on a new high-cost structure. Becoming another city like New York, Tokyo or Paris, stirs excitement, but the cost of living is bound to take after them as well. The present predicament may be a sign of things to come. Singapore’s economy is gradually favouring the businessman over the ordinary worker. Some economists think the price surge will eventually settle back when the economy slows. “But many of the basic food prices, once raised, will not become cheaper ever again,” exclaimed a housewife. “We’re stuck with them.” There is rumbling in the heartland where 85% of Singaporeans live. The price hikes of basic goods and services are hurting many citizens with average or low incomes. The government is watching with some concern, although it has so far taken little public steps to combat the snowballing increases. When the GST increase comes into effect next month, the Singaporean pocket will be hit even harder. He will have to pay a 7% tax of almost every product or service, unless an exemption is stipulated. The authorities are dishing out S$100-S$400 a year to each adult over next four years to mitigate its impact. The poorer people get the higher sum. Apart from possible political fallout, the government will likely want to prevent higher costs from derailing its strategy of attracting foreign investment and talent. Already American businessmen have complained that spiralling rents are creating problems for them, forcing a number to relocate elsewhere. Cases of condo rents at choice areas rising up to by 50-70% once a lease expires have been growing, a trend that could benefit Singapore’s neighbours. (This article was published in The Star, Malaysia, on June 16, 2007) Price increases are expected when the GST goes up by 2%. And the Singaporeans should have no problem facing the increases. Thanks to the govt who have the foresight to anticipate the increases and has given several hundred dollars to every Singaporeans in advance. That's thoughtful. For me, it will be more money in the kitty as I will not be spending more than before. I will cut down on my food intake, 1 pack of 3 in 1 Super Coffee instead of 2, go to the barber once in two months instead of every month, use less water, lesser colgate, lesser hair cream. And drop one station earlier from the MRT and walk. It has the additional benefit of exercising my leg muscles. And all these with govt handouts safely in the kitty. Isn't that nice?