Inflationary pressures: adding fuel to fire?
In her speech, President Halimah spoke about shifts in the geopolitical landscape, and the implications that this will have on the Singapore economy.
She described trends that we have been concerned about for a few years now – growing obstacles to global trade, and economic nationalism. Both of these trends are expected to persist in the years to come, and both of these trends are inflationary.
Indeed, the latest MAS data showed that core consumer prices rose by 5.5% year on year in February – with food prices up more than 8%. We haven’t seen food prices go up so quickly since 2008.
Although the MAS expects inflation to “slow more discernibly in the second half of this year”, and hopefully “reach around 2.5% y-o-y by the end of 2023”, the projection for core consumer prices to rise by 3.5 – 4.5% over 2023 as a whole and for headline inflation to average 5.5 – 6.5% is still elevated compared to recent history, and certainly out of the comfort range for many Singaporeans.
Last year, wage growth for those of us who are employed full-time outpaced inflation, but only barely. Real median incomes grew just 2% in 2022 – almost half as fast as it used to grow in the pre-covid years (2014 – 2019: 3.8% p.a.).
Working Singaporeans’ earnings power will be reduced again when the second GST hike kicks in in January 2024. I find it ironic that in its latest monetary policy statement, it appears the MAS took pains to highlight that the higher inflation rates we have seen at the start of the year “reflected in part the increase in GST”, and that “when the impact of the GST increase is excluded, core inflation would be even lower, and closer to the historical average”. Why add fuel to fire?
The Government’s support measures are designed to ensure that Singaporeans “with greater means contribute their fair share of taxes”. But from an inter-generational equity perspective, you can see why so many younger Singaporeans feel anxious and uneasy about the future. Some have even given up on the aspiration to raise a family here. Even some senior citizens I have met tell me that they worry most about how the higher cost of living impacts their children and feel compelled to carry on working, even though they may not wish to do so.
As workers and business owners, we will strive to be more productive and more competitive – and hope that our wages can go up higher than inflation. But I also hope that the Government can avoid introducing more pressure into the system through an untimely GST hike, especially if wage growth remains uneven, or weak.
Because when the cost of living – real or perceived – is too high, that hurts Singapore’s attractiveness as a liveable city, it weakens our younger one’s confidence to take risks, and we become less competitive globally. Just last month, the Business Times reported that in a business sentiment survey conducted by the Singaporean-German Chamber of Industry and Commerce, almost half of German employers in Singapore polled, or 44 per cent, said ‘psychological distress and lower work performance is visible among staff” due to the unpredictable housing situation.
Redundancy insurance and worker protections
My second point is about income security for workers who may find themselves displaced if labour market conditions deteriorate.
Last week, the IMF warned that inflation is much stickier than anticipated even a few months ago, and the chances of a “hard landing” for the global economy have risen sharply. Here in Singapore, GDP already fell sequentially by 0.7% in the first quarter of the year, with goods producing industries seeing a sharper 4.1% decline. While the Government has not updated its expectations for GDP growth of 0.5–2.5% in 2023, the risk of a recession is only getting higher.
Some of you would know that I work in the banking sector, for a bank which is the subject of an emergency takeover. The recent turbulence at our firm has taken a very deep emotional toll on my friends and colleagues.
In Singapore, job security is especially vexing because there is no nationally defined social protection floor that our workers can stand on to feel secure. There is also no law mandating retrenchment benefits in Singapore, which could be critical in ensuring displaced workers and their families have sufficient liquidity to meet basic living needs. This is especially pertinent during periods of recession and labour market weakness, where a longer time is needed to secure employment.
I was therefore heartened to hear President Halimah say that the Ggovernmovernment will study how it can extend support schemes similar to the COVID‐19 Recovery Grant – beyond the pandemic.
We should explore how the administrative arrangements for the COVID-19 Recovery grant can be adapted for a wider redundancy insurance scheme. The Workers’ Party has consistently been pushing for a redundancy insurance scheme since 2011, and had also published a consultation paper on this back in 2016.
As our economy matures and as economic cycles become shorter and more unpredictable, many of us will have no choice but to make more frequent transitions between jobs and career paths – even when we are not financially prepared to do so.
By providing displaced workers with immediate income security, a redundancy insurance scheme can raise efficiency in the labour market and reduce underemployment. It will allow workers to take the time that is required to reskill and find a stronger job fit – instead of being pressured into choices that could hamper their longer-term career mobility, just so that they can pay the bills. With intensifying risks to our economy and labour markets, I hope that legislation on redundancy insurance can be put in place as soon as possible, even if it is called something else like a targeted re-employment scheme. Let’s roll it out now, before the next recession, when it will be needed.
Housing: unanswered questions remain
My third point is about a topic which is increasingly a key concern for many Singaporeans, and that is housing. To which I wish to declare my interest as an equity research analyst in a financial institution, covering the real estate industry.
We have had an extensive debate in this house about this topic just two months ago, and I will refrain from repeating much of the points which I have raised back then. However, as I have shared in my speech on the housing motion debates, the root cause of much of our housing woes today relate to supply, and the solution really is for the Government to take urgent and decisive steps to increase the availability of public housing, and ensure that the housing needs of all Singaporeans are met.
After all, while President Halimah spoke of running up against more binding constraints in land, labour and carbon over the coming years, when it comes to having enough space for future generations, PM Lee gave us an emphatic assurance late last year that: “Our problem is not finding the space to build enough flats, nor keeping homes affordable for Singaporeans. We know how to do that.”
I am thus comforted to read that DPM Lawrence Wong shared in a budget roundtable discussion last month that the root of the problem is a supply issue. However, while I recognise DPM Wong’s confidence in the Government’s ability to bring stability back to the market again, and perhaps this could eventually come when recession hits our shores, manifestations of the demand-supply imbalance in our housing market continue to persist in the meantime.
House prices have continued to climb, where based on flash estimates for the first quarter of 2023, private residential prices rose 3.2% in the quarter, while HDB resale prices rose 0.9%, with both public and private prices rising for 12 consecutive quarters now.
Over in the public housing rental market especially, the Straits Times reported last week that “overall, HDB rents shot up 27.7 per cent in February compared with a year earlier – a rate of increase not seen in 15 years”, with January too seeing a similarly pace of increase.
Based on estimates by the real estate consultancy quoted in the article, the town of Sengkang which I represent, had the unfortunate honour of seeing rents rise the most across HDB estates, at 40.4% over a one-year period, with median rents now at $3,200 a month compared to around $2,200 a month last year.
During the MND COS debates last month, I called on the Government to support Singaporeans who may need to rent in the open market to address their immediate housing needs, given soaring open market rentals. At that point, Minister Desmond Lee shared that the Government will “keep an open mind and keep a close eye on the rental situation and will be prepared to take necessary measures in order to support Singaporeans”.
I still hope that the Government will consider intervening in the market sooner than later, rather than continue monitoring the market, in order to preserve open market rental affordability.
On that note, I am heartened to know that the MND recognises that we have more singles and caregivers in our society, and more young Singaporeans who aspire to live independently. In particular, I am excited to read that the MND is working on developing more inclusive housing options, specifically for singles, seniors, and those with disabilities. Just as I have mentioned in my Adjournment Motion last year, I believe this is the right step to take for our public housing policies to be “inclusive” and to “reflect the diversity of our society”.
As part of these options, I would like to once again reiterate my calls made in prior adjournment motions to support Singaporeans’ diverse aspirations through expanding on rental housing, and to lower the BTO eligibility age for singles from 35 to 28 years old.
Our younger Singaporeans aspire to have a place of their own, and this is a trend which I believe the Government would have been closely monitoring as well. This is why I have called on the Government to significantly increase the stock of rental flats across flat sizes, thereby creating a viable and expanded public rental scheme, with an emphasis on ensuring that our lower to middle income households’ housing needs are well looked after.
This is also aptly captured in a recent Mothership series on housing, which documented couples who are affected by the delay in BTO flats but are not lucky enough to secure a flat under the Parenthood Provisional Housing Scheme, and are faced with an option to either stay at their parents’ homes with no private space or pay an increasingly expensive rental lease.
Even if the Government still believes in home ownership as a superior model, a pathway to ensure that younger Singaporeans’ housing needs are adequately met, is to lower singles’ eligibility age for HDB BTO flats from the current 35 years to 28 years old. This is when most Singaporeans would have been in the workforce for a few years and have begun to lead more independent lives.
This proposal would be a critical change, yet a continuation of the Government’s efforts over the years to expand HDB options for singles, while still allowing HDB to give priority to providing for families. In fact, we believe lowering the threshold for owning HDB flats to 28 years would go a long way towards HDB’s stated aims for Singapore’s public housing to be “inclusive” and to “reflect the diversity of our society”.
Yet even as we refresh our social compact on housing and reimagine a range of housing options for a more inclusive housing programme, the next chapter of our housing story still leaves one big question unanswered: what about VERS and the end of the 99-year lease?
Together with my honourable friends Mr Leon Perera and Jamus Lim, I asked SMS Sim Ann for more details about VERS at the housing motion debates in February, given that we know hardly anything about it despite it being introduced about five years ago. I am sure the Government would have been monitoring and studying this issue for a long time now, and I was carefully scrutinising Mdm President’s speech and the MND addendum to the President’s address, for any mention of VERS and solutions to address the elephant in the room, the lease decay issue, but to no avail. Is this an issue that the 4G leaders are prepared to address?
At the housing motion debates, my honourable friend Jamus Lim highlighted the fundamental tension between housing as a retirement asset and as a home. In that our current HDB and CPF policies may be a dangerous game of musical chairs. If one is able to offload one’s flat before its price collapses—as it must, eventually—then we can retire comfortably. But then, the one holding the bag is a fellow Singaporean, who bought your resale because they needed the space for a growing family and couldn’t afford to wait for a BTO. Essentially, what goes up, must come down. The higher the climb, the harder the fall.
And it is not just The Workers’ Party that is worried about this increasingly untenable link. In a commentary published by the Straits Times earlier this month, associate professor of law Eugene Tan spoke of the trap of ever spiralling expectations in the housing market, which will be too much to bear for all stakeholders. He shared that “looking ahead, the reality of leases decay – as flats built in the 1960s and 1970s rundown their 99-year leases – will increasingly bite harder. This sobering reality will have to be adjusted to as well even as older Singaporeans hope to leave their residential property to their children.”
The Workers’ Party had proposed a universal sale and lease back scheme, that provides a floor price for HDB resale prices where the HDB is the buyer of last resort for all lessees, where each individual lessee is empowered to exercise the scheme and not be subject to a voluntary process which is out of the hands of the individual lessee. SMS Sim Ann shared the same notion of having the Government coming in as the purchaser of last resort, although it remains to be seen how this can pan out in practice if VERS, as the name suggests, is voluntary and subject to voting by residents in the precinct.
But critically, I struggle to see how amid all of these concerns and the eventuality of the value of HDB flats reaching zero at the end of the 99-year lease, the PAP Government can honour its promise to all Singaporeans as shared by PM Lee last month, “that your HDB flat will be both a good home for you and your family, and a valuable nest egg for your retirement”.
I of course hope that what PM Lee shared can materialise. But for the sake of the current and future generations of Singaporeans, it is imperative that we lay out our plans to achieve these increasingly untenable links between affordable housing and retirement adequacy.
Mr Speaker, allow me to say a few words in Mandarin.
在经济增长放缓和劳动力市场疲软的背景下，我想呼吁政府加快为失业工人制定冗员保险计划，加强国人的收入保障，也借此呼吁政府提供有关自愿提早重建计划 （VERS ）的信息，解决租问题。
因此，我想重申我在之前的休会动议中提出的方案，即通过扩大出租房屋来支持新加坡人的多元化住房意愿，并将单身人士的预购组屋申购资格从 35 岁降低到 28 岁。
然而，即使我们更新了住房的社会契约并重新编织一系列新的住房选择，新加坡住房故事的下一章仍然有一个未解决的大问题：自愿提早重建计划 （VERS ）和 99 年契约的结束情况，究竟将如何是好呢 ？
Conclusion: A matter of trust or blind faith?
In closing, I have one final reflection. This concerns President Halimah’s remark that in so many societies… political parties aggravate rifts instead of bringing people together.
I hope it is clear to this House and Singaporeans from the positions that I and my fellow WP colleagues have put forth, that we speak always to advance the larger public interest. It would be foolish and self-destructive for us to do otherwise. We are Singaporeans too and have just as much of a stake in the well-being of this country as the ruling party does.
So even though my colleagues and I don’t enjoy the same access to information, networks and resources that some of our honourable members do, we continue to strive to make constructive contributions to the policy debates in this House.
On that note, I look forward to having more robust yet respectful debates in this House, for let’s not forget the capacity to have respectful contestation of ideas and views, is a key piece in building public trust in Singapore’s institutions.