DPM Tharman: Average S'porean won't feel the sharp effects of inflation

The average Singapore will not feel the effects of a sharp inflation, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said today in a speech at this year's May Day dinner.

He acknowledged that the 5.2 per cent increase in the Consumer Price Index (CPI) for March 2012 compared to a year ago, was a "high figure".

But more than half of this inflation rate of 5.2 per cent comes from higher COE premiums on cars and the effect of higher market rents on homes, the Manpower Minister said.

So those who already own their homes and are not buying a new car will be unaffected.

In fact for most Singaporeans, inflation in actual household expenses is lower than 5 per cent.

Mr Tharman explained that the increase in prices of daily necessities and essential services, such as food, clothing and footwear, and education, has actually been much more moderate, at 3.0 per cent or lower.

Nevertheless the Government is closely monitoring the situation, including prices of everyday goods and services, Mr Tharman said.

Inflation remains an important challenge and it is also one that union leaders are most concerned about, he said.

The Monetary Authority of Singapore has been gradually strengthening the value of the Singapore dollar to reduce the impact of imported inflation.

Actions have also been taken to cool the property market as an overheated property market with inflated property prices, while by themselves not part of the CPI, can drive up other prices.

Middle-incomers' wages rose the highest: DPM Tharman

THE real wages of middle- income earners have risen the most among Singaporeans in the last five years, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

Households in the middle had an increase of 3.2 per cent each year for their income per household member. This figure was arrived at after taking inflation into account.

The growth is higher compared to those in higher-income and lower-income brackets.

Speaking at the Budget debate in Parliament yesterday, Mr Tharman, who is also Manpower Minister, said: "What's our basic strategy to help the middle- income group? It is to raise real incomes.

"That is our most important strategy for helping them to cope with the cost of living and to be the drivers of Singapore's success."

Mr Tharman said such a high income growth for the median household is "quite rare".

He pointed to how the real median income growth over the last five years for Hong Kong and Taiwan was "negative", and how, in most developed countries, it is "significantly lower" than Singapore's.

The second strategy, he said, is to "keep the tax burden low".

"We keep taxes low and make sure that the system is as neutral as possible for the middle-income group, while it provides the low-income group with substantially more benefits than the taxes they paid."

Mr Tharman said that a low- income household gets about $4 in benefits for every dollar of taxes paid over a lifetime.

For a middle-income household which owns a car, it gets "about 80 cents back for every dollar in taxes" paid over a lifetime. Those who do not own a car will get about "$1.50 in benefits for every dollar in taxes" paid over a lifetime.

He also pledged that the Government is looking to help small and medium-sized enterprises (SMEs) cope with challenges, especially concerns over the tightening of foreign labour supply.

"Flexibilities" in the use of foreign workers within the dependency-ratio ceiling would be considered, he added.

For instance, the Government is looking into relaxing "occupational restrictions" in the hotel sector.

While Mr Tharman noted there were concerns that "too quick a withdrawal of foreign workers will hurt our SMEs", he said doing so too slowly would lessen the incentive to upgrade and lead to "even bigger and longer-term problems further down the road".

He added that foreign workers "are and will remain integral to our economy and to our competitiveness".

"They are a valuable complement to the Singaporean core that we must keep building up in every segment of our workforce.