Govt closely monitoring inflation: DPM Tharman

SINGAPORE: Deputy Prime Minister and Minister for Finance and Manpower Tharman Shanmugaratnam has assured Singaporeans that the government is closely monitoring inflation including prices of everyday goods and services.

Speaking at the May Day dinner, he noted that inflation remains an important challenge and one that union leaders are most concerned about.

This year's May Day dinner comes at a time of continuing uncertainty in the global economy, caused especially by the problems in Europe, said Mr Tharman.

In Singapore however, he said the economy is not in a bad shape.

"Our unemployment rate remains lower than in most other countries. This is due to the very large number of jobs created last year. With the economic slowdown, we have seen a pick-up in redundancies since the last quarter of 2011, and can expect a slight increase in unemployment in the short term as displaced workers take some time to find new jobs," said Mr Tharman.

Singapore's Consumer Price Index (CPI) rose by about 5.2 per cent in March 2012 compared to a year ago and he said this is a high figure.

However, he also explained that this does not mean that the average Singaporean will feel this high inflation.

That is because more than half of the headline inflation rate of 5.2 per cent came from higher COEs for cars and the effect of higher market rent on houses.

Mr Tharman assured that the vast majority of Singaporeans who already own their homes and are not buying new cars will not feel the effects of these sharp increases.

Mr Tharman also said the increase in prices of daily necessities and essential services such as food and clothing have actually been much more moderate at three per cent or lower.

"The vast majority of Singaporeans, who already own their homes and are not buying a new car, will not feel the effects of these sharp increases. The increase in prices of daily necessities and essential services, such as food, clothing & footwear and education, has actually been much more moderate, at three per cent or lower. The inflation in actual household expenditures for most Singaporeans is hence lower than five per cent," said Mr Tharman.

He added: "Nevertheless, we are closely monitoring the situation, including prices of everyday goods and services. MAS has been strengthening the value of our dollar to reduce the impact of imported inflation. The government has taken actions to cool the property market. Although property prices are not part of the consumer price index, in an overheated property market, many other prices can also go up. We will keep a close watch on the property market.

"In the meantime too, the government is providing some help for Singaporean households to cope with the rising cost of living. This year, we introduced GST vouchers, which will help lower income Singaporeans and especially our older folk with their expenses."

Mr Tharman noted that the National Wages Council has been discussing the wage guidelines for 2012 and 2013 and he is sure that they will consider all factors carefully before making their recommendations, expected by June.

Mr Tharman hopes that the guidelines will allow workers to get their fair share from the growth over the past year and get wage increases that can be sustained while still ensuring that businesses in Singapore remain competitive and continue to generate good jobs.