Majority of Singaporeans will not be directly affected by inflation. Who do we believe?

By Jen –

Some of us know the difference between truth and half truth and the meaning of “spin” which is why we read carefully between the lines when it comes to news related to politics. For the uninitiated, spin is defined by Wikipedia as "a form of propaganda, achieved through providing an interpretation of an event or campaign to persuade public opinion in favor or against a certain organization or public figure. While traditional public relations may also rely on creative presentation of the facts, "spin" often, though not always, implies disingenuous, deceptive and/or highly manipulative tactics.^"

In the global political arena, what we often hear (especially from the more powerful/aggressive/deceptive politicians) falls somewhere along the continuum of truth and spin. But what does one call something that falls outside of spin and half-truth, sounds utterly unbelievable and is contrary to what we experience in reality?  Is there even any politically correct term for it? Or should we just call a spade a spade – that those politicians who say such incredulous stuff are either out of touch with reality or deliberately spinning a far-fetched tale for their own agenda.

Recently, many Singaporeans were stunned (to put it mildly) when Deputy Prime Minister Tharman said the "average Singapore" will not be affected by the high inflation after the latest set of Consumer Price Index (CPI) figures for March was announced. This led many Singaporeans to dispute this claim both in the mainstream media and online. The bigger shock came today when the news reports on what the Government said in Parliament yesterday regarding inflation raised even more disbelieving brows.

The TODAY newspaper's headline (15 May, 2012) screamed "Majority of Singaporeans will not be directly affected by inflation" while the Straits Times front page today quoted the Minister of State for Manpower Tan Chuan-Jin as saying "the Government does not expect the current high levels of inflation to persist in the years to come".

And the Government also took pains to point out in Parliament that the current food price increases (based on their CPI calculations) are nowhere near the peak of 2008 when prices soared nearly 8% due to bad weather and global shortage. I am not sure what their point of mentioning this was.  Was it to tell us to be thankful or was it a distraction tactic? So what if the prices shot up 8% in 2008 and the current increase is lower compared to back then? What consumers are fretting over is that prices are still rising since that sharp 8% increase! And if we were to compare with 5 years ago (2007), the price percentage increases would have gone up by much more isn't it?

Every average person whom I have talked to from the aunty who makes my favourite teh tarik to the taxi-driver say that they are feeling the pinch of inflation every single day. Most Singaporeans who pay their own bills would know just how hard inflation has hit them. The list of prices increase seems to get longer every day – the infamous housing and car/COE prices, the higher charges for public transportation (yes including taxis as they are a commonly used form of public transport), petrol, car-parking, healthcare, vitamins, medicine, groceries, food and electricity and water bills.

Adding to the confusion of "is inflation going up or easing off" are the different reports we have been reading in the media. Straits Times carried a report on May 8 with the headline: "Singapore inflation worrying: ING Bank economist". This senior economist had warned that inflation in Singapore may accelerate even faster if it is not capped at a reasonable rate. He highlighted inflation as a key worry for Singapore after the rise in the CPI hit 5.2 per cent in March.

On May 12th last week, ST ran another report with the headline "Prices likely to go up before adjusting".  It quoted various leading economists who held the common view that "Higher inflation is likely to stick around for a few years as Singapore's economy undergoes restructuring to raise productivity".  And in TODAY newspaper (published on May 15th), the report said the economists it had interviewed "disagreed" with the Government's view that most Singaporeans would not be directly affected by inflation. (here)

I have heard that with statistics, it's like a bikini, what you don't see or don't know is more interesting.  With all these contradictions, people are starting to question just how accurate is our Consumer Price Index and how is it computed? What goes into its basket of goods and how accurate is the weightage given to each item?

According to the CPI for March 2012, food inflation was only 2.7% – which doesn't jive with what many consumers are experiencing.  When questioned, the official explanation given was that the weights given to different types of food in the CPI basket are supposed to reflect the dining habits of the average Singaporean consumer, based on the results of a Household Expenditure Survey last conducted in 2007 and 2008. In addition, prepared meals account for around 60 per cent of the food basket in the current CPI. Based on this information, the basis for the CPI food inflation computation appears outdated. For one, that survey is too old and for another, I would have thought that the rate of eating out has gone up and people are cooking less at home due to their hectic work schedules.

Another bugbear for many of us is that the CPI excludes the cost of housing which would have pushed the index sky high if it were included. The official explanation for the exclusion? House purchases are excluded because they count as both a consumption expense and an investment expense. And the official rationale goes on that while consumers use the house for shelter, which counts as consumption, the house is also a capital asset that can be bought and sold later on (presumably at a profit?).

To quote Minister Lim Hng Kiang when explaining in Parliament why most of us ‘lucky’ folks will not be 'directly' affected by inflation: "The two largest contributors to CPI inflation are expected to be imputed rentals on owner-occupied accommodation and car prices. Together, they will account for more than half of the inflation this year. As the majority of resident households in Singapore own their homes, they do not actually incur rental expenditure. Likewise, the majority of resident households will not be directly affected by the rise in COE premiums as new car buyers make up a small proportion of all resident households. "

What was that again? I am not versed in political speak but I think he is trying to say – "You own a house you are ok, you don’t own a car you are also ok?” Hmm, what about those who can't afford to own a house? What about the young people who are worrying if they can afford to buy their dream home in future? What about the higher cost of almost everything from food to healthcare? What about the daily bills that many are struggling to pay? And aren't Singaporean car owners citizens too?

So many questions and so few answers. Is inflation easing or climbing higher? Are most Singaporeans affected by inflation or are we not? Who should we believe – the economists or the politicians?

I don't know about my fellow Singaporeans but I am not swallowing any spin or numbers that don't add up.  Meantime, I will continue to trust what I can see and what I am paying everyday out of my own pocket.

This commentary first appeared on Jentrified Citizen Blog. TOC thanks Jen for allowing us to reproduce in full.

This article is published by The Online Citizen, 20 Maxwell Road, #09-17 Maxwell House, Singapore 069113.