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High cost of living? Buy cheaper products, says minister

Posted by theonlinecitizen on November 13, 2007

By Choo Zheng Xi

Recent price hikes have prompted several members of Parliament to voice their concern about increasing cost of living, especially with respect to basic necessities.

In the third quarter of 2007, the consumer price index (CPI) rose by 2.7% year-on-year, compared to 1.0% in the second quarter and 0.5% in the first quarter.

Inflation is projected to hit a record 5% by 2008.

Yesterday in Parliament, Mr Lim Hng Kiang, Minister of Trade and Industry admitted that these were due to a ‘one off effect of GST hikes’ and mainly higher food prices. In his response to MPs questions today, he also had this advice for families hit by higher prices: “Switching to cheaper products can reduce the cost of living despite a rise in the CPI.”

TOC would like to point out the inadequacy of his answer: if people are complaining about higher prices, it is no answer to tell them to find cheaper goods. The point of the complaint is that people are finding it difficult to find cheaper goods.

For an illustration of price increases, please view TOC’s aggregation of increasing prices: The Relentless Rising Cost Of Living.


Reproduced below are the questions tabled and Mr Lim’s reply in Parliament.

Name and Constituency of Member of Parliament

Mdm Halimah Yacob, Member for Jurong GRC

Question : To ask the Minister for Trade and Industry whether the Ministry is monitoring (i) the increase in prices of food items, such as flour and chicken, and how will this affect consumers; and (ii) the impact of rising inflation on the cost of living.

Name and Constituency of Member of Parliament

Ms Sylvia Lim Swee Lian, Non-Constituency Member

Question: To ask the Minister for Trade and Industry (a) whether the increase in the cost of living, particularly food and milk prices, is a cause for concern; and (b) to what extent (i) has the hike in GST contributed to the increase and (ii) have the GST rebates mitigated the effects of the increase.

Answer

Mr Lim Hng Khiang: Mr Speaker Sir, inflation in Singapore is on a slightly rising trend. In the third quarter of 2007, the consumer price index (CPI) rose by 2.7% year-on-year, compared to 1.0% in the second quarter and 0.5% in the first quarter. This reflects mainly higher food prices and the one-off effect of the increase in GST in July this year. The price of food, which is the largest component in the CPI basket, rose by 3.3% year-on-year in the third quarter.

However, this third quarter figure does not yet include the most recent increases in the prices of flour and chicken. Food prices have risen mainly due to dearer imports, arising from disruptions in supply in some of our major food import sources. Adverse weather conditions in Australia, Malaysia and Indonesia have reduced crop yield and supply, raising prices of rice and cereals, vegetables and dairy products.

These supply disruptions have occurred against a backdrop of increased global demand for agricultural products, fuelled by rising living standards in emerging economies and higher bio-fuel production. Diversifying our food supply sources is one way we can reduce our vulnerability to such supply disruptions and maintain more stable food prices. AVA will continue to step up efforts to this end.

However, diversification cannot protect us against a worldwide increase in food prices, such as is happening now. The current uptick in inflation is a global phenomenon. In recent months, rapidly growing economies such as China and India as well as the developed economies, such as those in Europe, have experienced higher inflation. This is mostly due to higher food and energy costs.

Oil prices have reached historical highs in recent months, reflecting strong global demand, a relatively tight supply and low global inventories of oil. The rise in CPI inflation in Singa­pore has also reflected the impact of the GST increase. This was a one-off event that occurred when the GST was raised on 1 July 2007.

On a month-on-month basis, overall CPI has reverted back within the range recorded in months before the GST increase. It increased by 0.3% in August 2007 and fell 0.3% in September 2007. But because of the way the CPI is calculated, the GST increase will continue show up in higher CPI inflation figures for 12 months until June 2008, though to diminishing extents.

More importantly, unlike food import prices, the GST increase has had only a limited impact on basic food prices as the major supermarket chains have been absorbing the GST increase for basic food items. To mitigate the impact of the GST increase on the cost of living, the government introduced the GST Offset Package earlier this year. The GST Offset Package will more than offset the impact of the higher GST on lower income families. Middle-income Singaporeans have also enjoyed substantial benefits such as GST credits, utilities and rental rebates.

The pick-up in inflation in Singapore should also be viewed from the perspective of the rapid economic growth over the last three years. GDP has grown by more than 6.0% on average since 2003. Growth has also been broad-based, across all sectors of the economy. Wages have also been growing, especially last year and this year.

Against this backdrop, we should not be surprised to see inflation rise above the unusually low levels seen in recent years. We should also be wary of interpreting a rise in the headline CPI as necessarily reflecting an increase in the cost of living.

First, the CPI measures average changes in prices across all households. Whether there is an increase in the cost of living for a particular household depends on that household’s spending patterns. Switching to cheaper products can reduce the cost of living despite a rise in the CPI.

Second, an increase in the CPI can sometimes reflect technical factors rather than an actual increase in prices faced by consumers. Take for instance the revision in annual value of HDB flats announced by IRAS this morning. The adjustment in annual values will translate into a notional increase in imputed rentals of owner-occupied HDB flats, and hence raise the CPI in the coming months. But as HDB flat owners do not pay rentals on the flats they own, they will not experience higher inflation as a result of this revision in annual values.

One important way the Govern­ment helps to keep inflation low in Singa­pore is through our monetary policy, i.e. the policy on the exchange rate of the Singa­pore dollar. In recent years, MAS has been maintaining the exchange rate on a modest and gradually appreciating path. This strengthening Singa­pore dollar has helped to reduce imported inflation. If we had pursued a different exchange rate policy, such as one pegging the currency to the US dollar, Singa­poreans would have experienced higher inflation.

Mr Speaker Sir, Singapore’s overall inflation is rising but is still low by international standards and in the context of the healthy growth in incomes that we have seen in recent years. The government will continue to keep a tight watch to ensure that inflation remains low.

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37 Responses to “High cost of living? Buy cheaper products, says minister”

  1. Robert HO said

    RH:
    1. In my article “RH:Why Inflation should be 0 or even Negative”, I listed and pointed out the factors that are relentlessly driving DOWN prices of everything in business costs, from business telephony costs to costs of company computers to business software programs, etc, to filing cabinets to now-extinct secretaries. Read it at:

    2. In the context of Singapore, in recent context, I believe that the prime factor in recent horrific increases in the prices of everything is the almost annual GST increases. WHEN YOU INCREASE THE GST REGULARLY, IN SHORT INTERVALS OF ABOUT 1 YEAR, YOU SET IN MOTION BUSINESS EXPECTATIONS OF EVERYBODY FROM SMALL MERCHANTS TO HYPERMARKETS THAT PRICE INCREASES ARE NOT ONLY THE NORM BUT INEVITABLE AND SANCTIONED BY GOVT LEADING THE EXAMPLE WITH REGULAR AND FREQUENT GST INCREASES THUS TRIGGERING OFF PRICE INCREASES IN EVERYTHING, SINCE GST IMPACTS EVERY GOOD AND SERVICE. With frequent GST increases, the opportunities are thus created for unfair price increases and even profiteering. With the GST as the umbrella that covers everything, merchants can increase prices and profiteer by simply going along with GST increaase PLUS ADDING IN THEIR OWN PROFITEERING INCREASES ALONG WITH IT.

    3. To illustrate this another way, if there were NO GST increase, then merchants would have no excuse to raise prices and customers would question any and every increase and give their custom elsewhere to merchants who don’t increase. This natural economic law is what keeps merchants honest. With frequent GST increases, merchants have ample excuse to increase the prices of everything. Customers have no way to question these increases and are thus helpless. The economic law is broken. The relationship between buyer and seller is thus altered in favour of the seller. This is the pernicious effect of frequent GST increases.

    *Comments edited by moderator.

  2. macabresg said

    “Switching to cheaper products can reduce the cost of living despite a rise in the CPI.”

    That’s for now. When the economic crisis strikes, we will have to switch to even cheaper products. When the GST hike strikes again after the 2010/2011 elections, we probably have to eat grass.

  3. evozero said

    It’s interesting to note that we have a Price Control Act. Maybe it’s time to dust off the covers and take a look…

  4. Andrew Ong said

    I think this is an endless cycle (rising cost)as more of us (Singaporeans)move up the income level (from low to middle).

    Commercial companies will “attack” the mass market by upping their prices to improve their profits.

    Therefore, I think Minister Lim’s suggestion does have some practical truth in it despite sounding rather “lame”. For an instance, when cigerettes price increased, other cheaper brands such as Viceroy entered and become alternatives for many smokers who wanted to spend lesser.

    But digressing abit, this sometimes make me wonder how our Ministers can “feel the ground” when their salaries are of exhorbit amounts to feel any “pinch” an average Singaporean goes thru with increasing prices.

    http://www.economist.com/displaystory.cfm?story_id=10064094

    They seem to be above or out of the system.

  5. MadHatter said

    How would one “buy cheaper products” to address higher living costs when basic needs such as housing, which probably figures a huge portion of a typical middle-income person’s fixed overheads, keep getting more expensive to first, purchase, and then, own?

  6. Gary Teoh said

    In order to save cost,recently I make it a point to go JB once a week to shop for grocery and top up petrol.Though I have to endure traffic jam,it is still worth it.

  7. singapooor said

    “cheaper products”

    can cheaper products be a substitute to normal priced products? yes if only we can find them where we find the latter…

    in the singapore housing market, there are no “cheaper products”. the price of housing is indefinitely increasing

    in the provision/convenience/mamak shops market, with 7-eleven and Cheers crowding out the small players, there are hardly much “cheaper products”. Much of their products are priced higher than what u can get if only there was a chinese provision shop or econ mini mart or mamak shop there

    global wheat prices are droping yet i dont know why wheat products from flour to prata are getting more expensive. there are not many “cheaper products” alternatives either

    the list can go on……….

    much of the high prices is also due to high rents…

    as long as landlords (SLA being one) continue to charge high rents, businesses will only pass off their high costs to consumers….

    as long as landlords continue to give shop spaces for the basic things in life i.e. food, groceries, provision etc to the highest bidder, that highest bidder is likely to only pass off the premium he pays in rent to the consumers…

  8. singapooor said

    what hence needs to be tackled is all other costs which makes costs of products high…

    this is now a big hockey game passing the puck to each other(govt and us)where we are pointing to the govt and saying its their duty to check costs and govt pointing to us and suggesting rising costs is only natural and we should cope with rising costs…….

  9. Marc said

    I suppose if one cannot find cheaper products, Lim Hng Khiang will be telling everyone to eat less food.

  10. blackshirt said

    It is the prices of some of the cheaper products that are going up. So, where are the next cheaper products that we can find? Some of these products may not have any other alternatives. People are already using cheaper products.

    The minister needs to come down to the markets to see for himself.

  11. Nicholas said

    Then in that case lets switch to a “cheaper”(alternative)”product(party) too the workers party, coz PAP government and ministers need high salary to “maintain”.

  12. Cer said

    “Switching to cheaper products can reduce the cost of living despite a rise in the CPI.”
    So could one do if one is already using the “cheapest” products available?!?

  13. sevenleleven said

    this is a more realistic index as compared to the less than 1% increased after GST raised 2%

  14. Sammy said

    Yeah rite ! the peasants have to go for ‘cheaper’ alternatives? How much cheaper can you go if you are already eating at hawker centres? It’s not like the majority of us poor peasants eat Chicken Rice at SICC or at the Meritus Mandarin! DUH…

  15. Gavman said

    I recall one candidate saying that her favourite chicken rice was at SICC. Maybe our ruling elite are used to a comfortable life with 6 or 7 figure paycheck that they don’t feel the pinch. How can they empathise or understand those that they purport to represent and serve?

  16. family man said

    There are many things that is within the control of the Govt – they raised the GST to 7 percent and that added to the increase in our cost of living. Medical fees – they are aiming to have an undersupply of beds instead of slight oversupply – that will ensure prices of beds going up! There is much that govt planning can help – but they are saying they cannot do much – but they will have means testing in place – but they will help subsidise our HDB flats which are sold not at cost plus format – but market price format. With market price of condo hitting million dollars – we are all gonna die.

  17. kitsura said

    There is no cheaper utilities or transport available. Are you telling everyone to walk to work and start farming our own energy?

  18. Ace said

    People,

    What is with all the negative energy floating around here.

    PAP was voted by the people, and the state of affairs has been played out the same manner over and over again. Yet people still vote and vote them again and again.

    There is truth in everything the Minister/s says, if it is too expensive buy cheaper. Expensive things are meant for people with multi million dollar paychecks.

    – When food prices go up, eat less food
    – When medical costs go up, die
    – When you have no money for the family, jump down the MRT tracks

    This is the reality, what makes you think they give a rats ass about the “GROUND”. The ground is meant for sleeping by people whom are homeless by choice.

    When the system is such that they can say things like that and keep hiking fares and taxes for the “good of the nation”. What do you people really expect?

    Remember all this feeling which you are feeling now and act on them when you can exercise your vote.

    Remember the worst thing that can happen is that the “Awol opposition team” as described by LHL. Hike GST? Increase their own pay by some magic formulae? Make honest mistakes? Forget that ministers actually get pensions? Allow millions of FT to come in to compete with the cleaning aunties? Make being a citizen worth almost nothing by giving PRs and FTs the same kind of benefit or charging the PRs 50 cents more?

    Come on people….. Vote PAP…. We cannot allow the opposition A team to destroy our country. The country where it is better to be anyone but S’porean.

  19. Lawliet said

    I exclaimed when I saw the projected inflation rate and I thought this was a figure I would never see in Singapore. The Minister’s “advice” didn’t really sound any good either and I was wondering if he was kidding when he said it.

    Let’s just sit back and watch our real income fall?

  20. […] Inflation projected at 5% for the first half of the next year. […]

  21. […] (Source: theonlinecitizen) […]

  22. […] Full Story […]

  23. at82 said

    This is nothing when compared to the time when he is health minister.

    “I regret making the decision because, in the end, the baby continued to be in intensive care, and KKH now runs up a total bill of more than $300,000” – Lim Hng Kiang, regretting the decision to save a baby’s life because KKH ran up a $300,000 bill

  24. Aigh said

    http://forums.hardwarezone.com/showthread.php?p=26652106#post26652106

    Since when Fish(Seafood) is cheaper than Chicken (Poultry) ?? Ikan Bilis ??

    I find the MP’s statement unbelievable.

    Reminds me of a story from France.

    Minister : The people are complaining they can no longer afford bread and are going hungry.

    Queen: Cannot afford bread ? Eat biscuits lor …..(meaning not my fault)….lol

    MP for Jurong GRC Halimah Yacob, who will ask Trade and Industry Minister Lim Hng Kiang how the Government is tackling the situation, said more can be done to educate people on eating less-costly alternatives.

    ‘For example, the price of chicken may be rising fast, but we can encourage Singaporeans to turn to alternative sources of protein, such as fish,’ she told The Straits Times yesterday.

    —————————————————————————–

    http://www.straitstimes.com/Free/St…ory_175390.html

  25. Andrew Loh said

    Has anyone noticed the irony?

    When the GST hike was introduced, we were told that it was to help the poor. Now, with the govt admitting that the GST hike has contributed to this higher cost of living, they are now telling us to buy cheaper products.

    So, how does the GST hike help the poor? By forcing poorer Singaporeans to buy cheaper products, even though poor people would be buying cheaper products already anyway?

  26. macabresg said

    Andrew,

    The minister has said the GST hike has a one-off effect on our cost of living but that doesn’t mean future GST hikes won’t have any adverse effect. Coupled with the ever rising prices of items and no or less than enough rise in poor Singaporeans’ pay, to what extent can they sacrifice their quality of living?

  27. Lilian said

    To:

    Nicholas, Sammy and Kitsura – WELL SAID!

    To:

    At82…..yes I remember that comment too.

  28. Gary Teoh said

    cheaper products can be fake products, like DVD, cigarates,does Mr Lim encourage us to buy counterfeit products, given that it is cheaper.He eats sharkfin, abelone, beddha jump over the wall and he asked us to eat ikan bilis,fry egg,salted egg,sweet potato and tau geh.I regretted voting for them in GE 2006

  29. AXIS said

    Gary,

    You voted for them and has the cheek to complain ??

    I do not think you have the right lor…

    and I bet despite your regrets, you will vote PAP again because thats what you 66.6% are like psychologically.

    I really do not understand the minds of 66.6%

  30. sarek_home said

    Some interesting point from the minister’s reply.

    an increase in the CPI can sometimes reflect technical factors rather than an actual increase in prices faced by consumers.

    Our Department of Statistics certainly can filter out those technical factors to give us a good picture of actual increase in prices faced by consumers.

    Instead of speculating the effect of “technical factors”, show us the numbers.

    I guess NTUC will come up with more generic brand of products to meet the demand of lower cost alternatives, right?

    Will the rise of CPI push up pubic transport fee adjustment next year while the rich-poor gap continue to widen and the average income goes up?

  31. […] Daily on November 14th, 2007 Singaporeans are fed, up with progress! – The Online Citizen: High cost of living? Buy cheaper products, says Minister – Mr Wang Says So: Perhaps the Minister is a Little Confused – Mollymeek: Save Money the Elitist […]

  32. sevenleleven said

    a million dollars salaried solution?

  33. familyman said

    The other issue I felt upset about was the compulsory insurance for babies- unless you opt out. When asked if the scheme would include babies born and later found to have congenital diseases, would the insurance cover continue? Answer from Miniter Khaw – no. The premiums would be too high.

    I hope the govt would know what it is they want to achieve. My personal take – if the govt wants the citizens to produce more children, I think the government should then take a stand to pay for part of the high premiums if one of our singapore babies is with a congenital disease.

    I do not think the govt should push her citizens to have more babies, but at the same time say – sorry dude – if your baby is seriously ill, the govt cannot ‘deplete its resources’ and help your kid. I think the country will grow from strength to strength only if our citizens, govt and leaders all stay together and say, all the children are our future and no one, not even the congenital diseased child will be left behind.

    Then maybe, the people will feel the sincerity of the govt and the population will grow – more baies, cos the govt is willing to help the parents and the child.

  34. Gary Teoh said

    Hi AXIS,
    No way I am going to vote for PAP again, you see this week they increased the annual value of our private property by 20%, and we have to pay more to IRAS just because the economy is steaming, and my pay is stagnant, so end up I have to pay more.I think this time round Singaporeans are more sensible now, the votes will go to the opposition.

  35. i see said

    hello ??? i thought singaporean veri well educated, know how to distinguish what is a good solution from a bad one. minister can give a statement – go buy cheaper product as answer. pay him $400/mth as salary better. vote for them lah. cannot solve problem, only know how to shift the problem back to the people. yah, more GOOD yrs ahead !!!

  36. Alan Tan said

    Noodles around my housing estate is selling at $3.50 per bowl now… Please advise on what I should’ve for my meal!

  37. TalkCock said

    Yes, I most definitely want to switch to a cheaper Minister of Trade and Industry. Hopefully someone who hadn’t been bounced from ministry to ministry, didn’t call Singapore’s first SARS victim a super-infector and declared the disease under control when it wasn’t, advised women to forgo hairdos for breast examinations, and priced a child at below $300K.

    Or maybe what he really he means is we should all move to JB and buy cheap cars, houses and groceries and leave Singapore to FTs and millionaire ministers.

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