Measures To Counter Impact of Inflationary Costs21 Nov 2011
Date: 21 November 2011
PQ for Written Answer:
To ask the Deputy Prime Minister and Minister for Finance (a) what measures are in place to help Singaporeans cope with the higher cost of living, especially food prices; (b) whether it will be sustainable for the Singapore dollar to continue its appreciation trend to dampen inflationary pressures, given its impact on the export sector.
Reply by DPM and Finance Minister Tharman Shanmugaratnam:
1. The ‘headline’ CPI inflation figure is expected to average about 5% in 2011. However, the actual cost of living increase for most households is lower than this. This is because the headline CPI estimate includes imputed rentals on owner-occupied homes, which are not actually paid by households. It has also been significantly influenced this year by the sharp rise in Certificate of Entitlement (COE) premiums, although only a small percentage of households have bought cars this year. Excluding these two factors, the cost of living increase for the majority of Singaporeans is expected to be about 2.1% for 2011.
2. Food price inflation has averaged 2.9% in the first 9 months of the year.
3. The “Grow & Share” package for Singaporeans that was introduced in this year’s Budget more than offsets the increase in the cost of the household baskets for lower- and middle-income Singaporean households this year. For example, a family of four with two children and earning a combined income of $2,000 will receive about $3,100 in benefits. This is around four times the expected increase in their household expenses this year of about $770. This also does not take into account other permanent benefits that Budget 2011 introduced besides the Grow & Share package, such as the enhanced subsidies for pre-school education and childcare for lower income families, and the removal of the radio/TV licence fees.
4. Nevertheless there are needy families who need additional help due to their unique circumstances. They can get help from Comcare and other schemes, and many do so.
5. The strengthening of the Singapore dollar is a key macro-economic policy tool to keep inflation in check over the medium term. The Monetary Authority of Singapore (MAS) continues to recognise the need to strike the right balance between ensuring exporters are not unduly hurt by a stronger currency, and controlling price and cost pressures in the economy. Since April 2010, MAS has had a policy of gradual appreciation of the Singapore dollar currency against a trade-weighted basket of other currencies - in other words of the Singapore dollar Nominal Effective Exchange Rate (NEER).
6. Taking into account the cooling of global demand and likely moderation in inflationary pressures, MAS has adjusted the Singapore dollar Nominal Effective Exchange Rate (NEER) policy band in October this year to appreciate at a more modest and gradual pace.