Response to Mr Saktiandi Supaat’s Adjournment Motion on “Helping Singaporeans Navigate a High-interest Rate Environment”04 Oct 2022
1. Mr Speaker, I thank Mr Saktiandi Supaat for his adjournment motion. Our Government agencies will look into his points and suggestions, and I will respond to some of the key points raised.
2. As Mr Saktiandi observed, many central banks have been raising interest rates to tackle inflation. Similarly, the Monetary Authority of Singapore, or MAS, has taken steps to tighten monetary policy and is closely monitoring developments on this front. It is also alert to systemic risks to our financial system arising from higher interest rates.
3. The Government will provide assistance to cushion the impact on households and businesses. It is also important for all of us to take steps to adapt to this new environment.
4. I share Mr Saktiandi’s view that the higher interest rates we are experiencing may not be a passing phenomenon. Average interest rates over the next five years or more will likely be higher than what the world had experienced for the last fifteen to twenty years. We need to prepare ourselves for this change.
Living with Higher Interest Rates
Households and Individuals
5. Sir, whether we are facing low interest rates or high interest rates, the Government will continue to ensure that essential areas such as public housing, healthcare and education will remain affordable and accessible to all Singaporeans.
6. For education, the Government currently subsidises over 90% of the costs of education from primary to pre-university level. The subsidy rate for ITE is also more than 90%; for Polytechnics and Autonomous Universities, Government subsidies amount to around 85% and 75% of total costs respectively.
7. In addition, students can apply for bursaries and education loans to support their education-related expenses. The Tuition Fee Loan Scheme is available to all, while the Study Loan Scheme is available to students from lower- to middle-income households. Both loan schemes do not incur interest during study and require repayment only after graduation.
8. These are important support measures to ensure tertiary education remains affordable, and no Singaporean child will be denied of the opportunity to receive a good education because of financial difficulties.
9. On public housing, the Government will continue to sell new flats at prices below market value with significant housing subsidies. The end in mind is to encourage home ownership, and to enable as many families as possible to own their homes. Mr Desmond Lee spoke about this on Monday.
10. On the whole, the household debt situation in Singapore remains healthy. This is because of our prudent policies on unsecured consumer lending and residential mortgages. Residential mortgages are subject to loan-to-value limits as well as debt servicing ratios, which cap the amount of debt and monthly mortgage payment individuals can take on when they purchase properties.
11. MAS, MND and HDB recently announced measures to increase the medium-term interest rate floor used to compute the Total Debt Servicing Ratio and Mortgage Servicing Ratio for property loans by financial institutions, and introduced an interest rate floor for computing eligible loan amounts for housing loans granted by HDB. These will ensure that property buyers continue to borrow prudently. We will continue to monitor the property market and review our polices where necessary in a rising interest rate environment.
12. We will also work with financial and non-financial institutions to better help borrowers understand their loan commitments.
a. Mr Saktiandi highlighted the requirements MAS places on financial institutions to explain how a borrower’s monthly mortgage instalments would vary if interest rates increase.
b. Non-financial institutions, such as licensed moneylenders, are required to explain to the borrower the terms of the loan contract and the breakdown of each repayment that goes into servicing the principal amount and other costs, all in a language that the borrower understands. In addition, licensed moneylenders are only permitted to impose fixed borrowing costs and fixed interest rates, ensuring that borrowers would not be caught off-guard by rising interest rates.
13. Sir, for businesses, MAS assesses that most businesses in Singapore are currently able to manage debt-related risks with sufficient liquidity holdings, alongside the post-COVID earnings recovery.
14. The Government provides assistance to businesses through various credit schemes. Our economic agencies have assessed that there are available credit facilities for businesses. SME loan volumes for example, have continued to be stable in recent months.
15. With the expiry of the Temporary Bridging Loan Programme, enterprises can still tap on the Enterprise Financing Scheme, which supports access to financing for a wide range of business activities. Our economic agencies will monitor the situation closely and review the need for further adjustments.
16. Importantly, businesses would need to double down on efforts to improve productivity and upgrade the skills of their workers. This is the most effective way to improve our overall competitiveness and achieve a win-win outcome for both businesses and workers through economic growth.
17. There are many schemes available, including the Productivity Solutions Grant, the Energy Efficiency Grant, SkillsFuture subsidies and the newly introduced $70 million NTUC Company Training Committee Grant to help improve firm and worker productivity, and to build new enterprise and workforce capabilities. The government will also continue to provide Workfare Income Supplement and other support measures to boost the earnings of our lower-wage workers.
18. Let me now turn to the Government’s financial position. In the near term, significant market uncertainties have resulted in a weaker investment environment. The investment entities such as GIC and Temasek are closely monitoring macroeconomic and geopolitical developments, including changes to the interest rate environment, and will continue to maintain diverse portfolios to manage investment risks.
19. The impact of short-term market volatility on the Net Investment Returns Contribution or NIRC is mitigated as our NIR framework is designed to provide stability in an uncertain investment environment. It does so by smoothening out relevant asset bases over the long term; and calculating NIRC based on the expected long-term real rate of return of the investment entities.
20. As such, the NIRC serves as a steady stream of returns to fund our annual expenditure even in periods of market uncertainty. We are able to benefit from this source of revenue today, and also during the Covid-19 pandemic, because previous generations of Singaporeans worked hard and built up our reserves.
21. So, we must likewise do the responsible thing by safeguarding our reserves and growing it further, so that we leave behind a strategic asset and lay the foundations for a better future that will benefit our children and grandchildren.
All of Us Doing Our Part
22. I have spoken about how the Government will look after individuals, households and businesses. Another important area is how all of us can play a role in helping one another in a caring and inclusive society.
23. A key enabler is the high degree of trust in our society. Trust has allowed us to weather many uncertainties together, including our fight against COVID-19, and it will be a critical success factor as we face new challenges ahead such as rising inflation and higher interest rates.
24. Like other Members of this House, I have come across many heartwarming examples of institutions, community organisations, and also individual Singaporeans pitching in to help others who are facing difficulties. They generously provide extra assistance to complement what the Government is giving.
25. Mr Saktiandi and I are both serving in Bishan-Toa Payoh GRC. We are grateful to our corporate and community partners who work with us to provide additional local-level assistance to our residents, especially the vulnerable and lower-income families.
26. For example, my volunteers and I have been distributing monthly WeCare PAcks containing food items and daily necessities to our lower-income families. These are sponsored by donors. I have also raised additional amounts through our community welfare fund to provide NTUC vouchers and angbaos to our vulnerable residents, to give them additional help on top of the assistance from Government, to mitigate the impact of rising costs of living.
27. I know many Grassroots Advisers are doing the same, including Mr Saktiandi. As we say at the Chinese Development Assistance Council (CDAC), 一人一点心，社会更温馨 . When each of us contribute a little to help others, it makes our society more caring and warm.
28. Mr Speaker, these experiences give me much confidence that Singapore and Singaporeans have what it takes to weather the challenges ahead.
29. We are able to face stormy seas with greater confidence and resilience than many other countries, because of our mutual trust and our social cohesion. And we hope that every crisis will further strengthen our social compact and bring us even closer together as one united people. Thank you.