COST INCREASES

COST INCREASES:

(Impact on Singaporeans): 11.

Mr Sam Tan Chin Siong asked the Minister for Trade and Industry in view of the fact that the latest round of electricity fare hike follows a series of price increases for daily essentials, will the Government consider taking steps to ensure that public and/or private agencies do not collectively increase prices at the same time.

12.

Ms Irene Ng Phek Hoong asked the Minister for Trade and Industry (a) whether the Government is continuing to monitor the impact of cost increases on Singaporeans and is taking steps to assist households which need help; and (b) whether a national committee should be set up to review the cost increases over the past year, to oversee the impact of rising inflation on Singaporeans, and to coordinate the price increases in the various sectors, given public concerns over the spate of sudden increases.

Mr Iswaran (for the Minister for Trade and Industry): Sir, may I take Question Nos. 11 and 12 together, please?

Mr Speaker: Yes.

Mr Iswaran: Mr Speaker Sir, first, let me sketch out the outlook for inflation for 2008 and 2009, before I proceed to answer the questions from Mr Sam Tan and Ms Irene Ng.

Inflation in Singapore has started to ease. CPI inflation peaked in the second quarter of this year and is likely to decrease for the rest of the year. On a year-on-year basis, CPI inflation has come down from the high of 7.5% in the second quarter of this year, to 6.4% in August. This reflects mainly the moderation of global food and oil prices, as well as the washing out of the impact of the GST increase in July last year.

For 2009, the Monetary Authority of Singapore expects a reduction in headline inflation to 2.5% to 3.5%, down from the 6% to 7% this year.

Ms Irene Ng has asked if the Government will set up a national committee to review cost increases. Mr Sam Tan has also asked if the Government will take steps to ensure that private and public agencies do not raise prices at the same time. Much of the price increases that we have experienced can be traced back to increases in external prices, specifically and especially the price of oil. Higher oil prices have translated into higher pump prices, taxi fares, airfares and electricity tariffs. Several of these price increases are, therefore, happening at around the same time because they have the same underlying cause.

Should the Government step in to intervene? Our principle of allowing market forces to work has served us fairly well. We should let prices reflect the true cost of goods and services. Artificially suppressing prices through committees or other means encourages over-consumption and is not sustainable in the long run. In regulated sectors, such as public transport, telecommunications and utilities, we also have regulatory bodies to ensure that price increases proposed by the industries are not out of line with underlying cost increases.

For services provided by Government agencies, the Government's approach has been to charge realistic fees that reflect the cost of delivering the services.

The Government has been and will continue to monitor the impact of cost increases on Singaporeans very carefully. This is an ongoing exercise in Government. Therefore, there is no need to establish a national committee to do this. Where necessary, the Government can step in to provide targeted assistance to Singaporeans, as we have several times in the past, for those who might need help to cope with the cost increases. This the Government has done over the past few years.

Last year, the Government announced the GST Offset Package, which included GST credits, Senior Citizens' Bonus, U-Save rebates and top-ups to post-secondary education accounts. Members are very familiar with these programmes. The Government has structured these packages so that lower-income Singaporeans, who have been more affected by inflation, receive more benefits.

The Government understands and appreciates the concerns that Singaporeans have towards rising cost pressures. The practical steps that the Government has taken will go some way towards providing relief. And should the inflation situation worsens, the Government is also prepared to adjust its assistance schemes to help Singaporeans to cope.

Ms Irene Ng Phek Hoong: Sir, I agree with the Senior Minister of State's reply when he said that we should not over-react to the sudden surge in prices. But can I submit that Singaporeans have been very restrained? In other countries, when there are such increases in prices, especially electricity price increase of 21%, there will be protests in the streets and there will be riots. Can I ask the Minister to be more mindful that Singaporeans feel the pain, and they need to find a way to be assured that the Government is really trying to attend to their needs and their concerns? In my meet-the-people sessions, I see an increasing number of residents, including the middle class, who say they feel an incredible stress because of the spate of price increases.

Mr Speaker: You are making a speech, Ms Ng.

Ms Irene Ng Phek Hoong: Can I ask the Minister for an assurance that the help that the Government has given and will be giving is not only to the lower income but also to the middle income who feel the squeeze as well as to tell Singaporeans how is the Government going to make sure that such volatility will not impact on the lives of Singaporeans to the extent that they feel incapable of coping in a very reasoned way?

Mr Iswaran: Mr Speaker, Sir, I think restraint is a virtue. I think we should thank Singaporeans for that restraint.

As far as price increases are concerned, I think we all share this concern. We want to help Singaporeans cope the best they can and to ensure that they can manage their day-to-day living expenses. I think the general approach – and I reiterate this point because it is important – that we do not want to unnecessarily interfere in market mechanisms. Every time we do that, we create an entirely wrong perception of the Government and the system here, and we increase the regulatory risk perceptions. We just have to look around at other countries which do this quite regularly to see what the consequences can be.

Having said that, I think our key approach must be to ensure that timely and targeted help is given to Singaporeans, not just at the low-income level but across the board. There are two things I want to say about this. First, actually it is more a Ministry of Finance issue, but several schemes have been announced. I think many of them, such as the GST Offset Package and the Growth Dividends actually have gone well beyond the lower percentiles to higher levels as well. So middle-income Singaporeans have also benefited from them. I think the Ministry of Finance has said that the Government will review and act, as necessary, on this score. That is the first thing.

Secondly, if there are any egregious examples of people who are profiteering or taking advantage of the situation to sell, then I think those merit investigation and we have a committee against profiteering set up in MTI under Minister of State Lee Yi Shyan. And we will be very happy to receive those sorts of reports and act on them.