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Table of Contents B. BUDGET 2011: GROWING INCOMES, STRENGTHENING OUR SOCIETY
Building for the Future
B.1. We are taking major steps in this year’s Budget to strengthen our economy and society for the future. The Budget has two objectives.
B.2. First, we must grow incomes for all Singaporeans. We aim to raise incomes by 30% in real terms over this decade. However, we can only achieve this if we grow our economy, upgrade our businesses and invest in raising skills, craftsmanship and the quality of service in every job. That is the only way we can improve incomes and living standards, including for those at the lower end of the income ladder.
B.3. This year’s Budget doubles our commitments to achieving this objective. We will significantly enhance support for companies to invest in workers’ skills and productivity, and to help Singaporeans upgrade. We will also boost assistance for our companies to venture abroad, and to entrench high-value economic clusters in Singapore.
B.4. Together, these efforts comprise our core economic agenda. If we succeed, we will make the breakthrough into becoming a first-rate developed economy a decade from now, with advanced skills and higher incomes, and a larger base of globally competitive enterprises.
B.5. Second, we will strengthen our society. We will take further measures to ensure an inclusive society – where everyone can contribute and share in the country’s progress, regardless of where they start from. The Budget will introduce tax measures to expand support for lower- and middle-income Singaporeans. We will help their children get the best start in life through education, from pre-school through to tertiary education. We will enhance grants to help lower-income Singaporeans own their own homes. We will commit substantially more resources towards developing a top quality long-term care sector for the elderly. We will also raise the quality of life for all Singaporeans, by investing in the rejuvenation of our HDB neighbourhoods and developing a vibrant and widely accessible arts and culture scene.
B.6. Finally, we will also be able to share surpluses with Singaporeans this year. As I explained earlier, we have first, as a matter of prudence, used our surpluses to put back in Past Reserves what we had drawn during the crisis. Next, in Budget 2011, we are moving ahead with major measures for our future – to build up a vibrant economy and enable an inclusive society. However, our strong Budget also allows us to provide an additional package of benefits to all Singaporeans this year.
B.7. This is a bonus, but it is not merely incidental to our fiscal policy approach. It is how we share and redistribute the benefits of growth with Singaporeans, while keeping to fiscal discipline. This package of surplus-sharing will also help most of our lower- and middle-income households to offset their higher costs of living this year.
Dealing with Inflation
B.8. However, while we are able to share surpluses with Singaporeans this year, this is not the main way we deal with the rising cost of living. Let me briefly explain how we approach this problem of inflation.
B.9. As a country that imports almost all we consume, we will always be vulnerable to inflation abroad. This time round, it is mainly food, utilities and other fuel-related charges that are concerning most Singaporeans
B.10. Our first approach is to seek to moderate medium-term inflationary pressures through the Singapore dollar exchange rate policy of the MAS. The MAS has permitted the Singapore dollar to appreciate against a basket of foreign currencies over the last 18 months, which has helped counter inflation in imported goods. However, using the exchange rate to offset sudden spikes in prices, such as what we have seen in oil prices over the last six months, would require a sharp appreciation of the Singapore dollar. This would disrupt our exporters.
B.11. Second, the Government will stay alert to any attempts by businesses to profiteer or collude to raise prices excessively. This is unlikely to happen in most industries, because firms which raise prices excessively risk losing business to their competitors. Nevertheless, the Ministry of Trade and Industry (MTI) has been monitoring retail prices, and will be forming a group under Minister of State (MOS) Lee Yi Shyan to keep a closer watch on any excessive price increases or anti-competitive practices. In fact, some of our businesses can also be angels. NTUC Fairprice has just cut prices of its house brand items by 5% till the end of May, and NTUC Foodfare has also announced that it will not increase the prices of basic beverages like tea and coffee at most of its outlets.
B.12. The third way we help Singaporeans with inflation is through our fiscal policies. We provide greater subsidies and benefits to those who need it most, in health, education, housing and other areas. These are permanent programmes. On top of this there is more help for the needy through ComCare and a whole range of community-based programmes – just like the daily meal vouchers that Southwest CDC, using a donation from a local entrepreneur, has just expanded to reach out to 2,000 students living in the district.
B.13. The final approach, however, is the most fundamental. We must continue to grow Singaporeans’ incomes, so that even after taking into account inflation, their real purchasing power increases. It is not possible to achieve this every year, but we must grow the real incomes of Singaporeans over time. That is indeed the first major strategy of this Budget.
