Singapore is facing its steepest price rises in 27 years — partly due to government policy. The cost of living has gone up partly because of the sales tax hike last year, Finance Minister Tharman Shanmugaratnam said today while presenting this year’s budget.
But the main reason for inflation is high prices of food and oil due to rising global demand, he said, adding that "inflation is higher today than we have been used to for many years".
The consumer price index, which averaged 2 percent last year, hit 4.4 percent in December and is expected to hit 4.5 percent to 5.5 percent this year — Singapore’s highest inflation rate since 1981, according to Channel NewsAsia. Prices rose after the Goods and Services Tax (GST) was raised from 5 percent to 7 percent in July last year.
Shanmugratnam said in his budget speech:
The relatively high ‘headline’ consumer price index (CPI) numbers that we are now seeing, like in December, are partly due to the GST increase in July last year. The CPI inflation figure continues to show the impact of the GST change, because it is comparing prices this month with prices 12 months ago, that is, before the GST increase in July 2007. But if we compare prices today with prices say in September last year, there has been little further increase due to the GST change. The GST change has caused only a one-off increase in prices, and not continuing price increases.
He stressed:
Singaporeans have not been materially affected by the GST increase, because the government has provided the majority of citizens with substantial offsets, which more than make up for the increased spending on GST by most families. Lower-income families are in fact receiving offsets which are several times larger than their higher GST payments.
Rising property prices have also contributed to inflation, he added.
(The) rising values of homes… will contribute significantly to inflation this year. However, here too, most Singaporeans are not materially affected, as 95 percent of citizens own their own homes and do not pay rentals.
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