Easing Impact of High Core Inflation Rate on Low-wage Households

Mr Ang Wei Neng asked the Minister for Trade and Industry in view of the impact of the relatively high core inflation rate on Singaporeans whether the Ministry will be (i) taking actions to ease the high core inflation rate; and (ii) working with the other Ministries to cushion the impact of high core inflation rate on low-wage households.

MAS Core Inflation, which excludes accommodation and private road transport costs, averaged 2.1% between January and August this year, higher than the CPI-All Items inflation of 1.5% over the same period.

One of the drivers for MAS Core Inflation this year was the higher cost of food imports from the region, partly because of weather-related supply-side disruptions. Another key driver was services costs. As the economy restructures towards productivity-driven growth, tight labour market conditions have led to wage cost pressures during the transitional period. This has exerted upward pressure on the prices of consumer services, especially those with high labour content. Specifically, services inflation averaged 2.4% between January and August this year, while food inflation averaged 2.9% over the same period.

The Government remains committed to keeping inflation in check. The Monetary Authority of Singapore (MAS) has kept a gradual appreciation path for the Singapore dollar against a basket of currencies since April 2010. This helps to keep imported inflation contained and also moderates external demand for our exports, thereby reducing demand-led pressures on inflation. The Government has also put in place many productivity schemes,

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as well as transitional support measures, such as the Wage Credit Scheme, to help companies raise productivity and cope with wage cost pressures, thereby dampening the pass-through to consumer prices.

Nonetheless, the Government recognises that Singaporeans, especially those in low-income households, have been affected by the rising cost of living. The Government has adopted a multi-pronged approach to help them. First, we ensure that the economy remains healthy, competitive and vibrant so as to create a wide range of jobs for Singaporeans. Second, through Workfare, we encourage lower wage workers to stay in employment to upgrade their skills and improve their ability to earn more. Third, even as we push for productivity improvements at all levels, we have encouraged employers to share productivity gains with their workers through schemes, such as the Inclusive Growth Programme. Over the last five years, the nominal wages of Singapore Citizens in the bottom 20th percentile increased by 5.2% per annum.

Fourth, the Government supports low-income households through subsidies and transfers. In particular, the Government provides substantial subsidies in areas such as healthcare, childcare and education. Transfers and rebates such as the permanent GST Voucher scheme, public transport concessions and Service and Conservancy Charges (S&CC) rebates are also provided to qualifying households. According to the recently released Household Expenditure Survey 2012/13, among households in the lowest income quintile, Government transfers and rebates/subsidies amounted to 90% of their annual household income per household member before Government transfers.

The Government will continue to monitor closely the cost of living in Singapore and help Singaporeans, particularly those in low-income households, cope with rising cost pressures.