Why Average Singaporeans ARE Hurt By Inflation

Remember my last post about inflation? I was quite specific about what caused it. As I recall, I typed Absurd Optimism in larger than average font, and wrote “Inflation seems to be getting worse because of our laid back attitude“. Cue an official statement by DPM Tharman Shanmugaratnam, which explains that, chillax, the “average Singaporean” won’t feel it. As I’ve now had my point politely proven for me, I’ll move on to the next issue: Inflation DOES affect you, and here’s why:

 

 

Core Inflation vs. Consumer Price Index

Okay, so we know the consumer price index (CPI) is 5.2%, going on 6%. But what’s this talk of “necessities” only being just 3%?

That 3% is the measure of core inflation. Supposedly, core inflation is a more accurate measure of how inflation affects you. Because rather than include the cost of optional purchases, core inflation focuses on price changes in necessities: The things you must buy to survive.

A “house” is apparently not one of those things.

 

 

That’s right, our method of calculating core inflation excludes housing and private transport. If you eliminate the two biggest factors of inflation, the numbers look real soothing. In fact, I’ll go one better than soothing: According to core inflation, not only do things remain affordable, but inflation has actually decreased. 

Here’s a quote from Channel NewsAsia:

The MAS’ measure of core inflation, which excludes accommodation and private road transport, eased to 2.9 per cent in March compared to a year earlier, from 3.0 per cent in February.”

So assuming you don’t buy a car and really love camping, you should be fine. For the rest of us, these are the effects:

 

1. Your Savings Are Being Devalued

 

 

As an average Singaporean, I have a savings account. A regular savings account with less-than-stunning 0.125% interest. It’s that low because, not having a Sentosa Cove Bungalow and a million dollar pay cheque, I’m a pimple on the backside of our banking industry.

Maybe you’re a bit better (or worse) off. But either way, most “average Singaporeans” have interest rates that will never cope with this inflation. Every day our money sits in the bank, it becomes more worthless. We’re losing money faster than a Blackjack player who can’t count to 21, and the thought of retirement is a sad, bitter joke.

Don’t have high hopes for your CPF either. At a rate of 2.5%, it fares better than your bank account. But even that’s insufficient to cope with inflation; and you’ll be using a huge chunk of it when you BUY HOUSING. You know, that thing that’s NOT factored into inflation.

 

2. Your Wages Decrease

Your income is going to face more problems than an ah beng caught with a pig’s head and spray can at midnight.

As property prices go up, home owners and landlords are faced with higher repayments. The solution is to raise their rent. This has an adverse effect on companies, particularly if they have expatriate workers to shelter.

 

 

Also, the commercial properties are beginning to suffer a spillover from the overheated residential properties; office rent is also climbing.

Employers who need inventory space (retailers) or operating space (restaurants) are starting to feel the squeeze. As rental and property prices eat into their profit margins, they will be pressured into raising their own prices. And because their overheads swallow the extra cash from price hikes, there’s no budget for your raise.

There are two results:

  • Everything is more expensive, but your wages don’t grow
  • Inflation is affecting you, even if you don’t buy a house

 

3. You Can’t Fully Avoid The Cost Of Private Transport

Cars aren’t always luxuries. If you have a sick mother to take care of, or children to send to school, they become necessities.

Again, this is where MAS’ beloved core inflation fails. The price of cars (private transport) is excluded, so core inflation doesn’t accurately reflect your situation. I won’t go into detail on COE prices, because I already covered it in the last article. But it’s worth noting that, even if you can surrender the car, you won’t dodge inflation.

 

 

Companies need to buy cars as well. Courier companies, which transport equipment between retailers, need to pay for licenses too. And what about the food vans that deliver to hawker centres or supermarkets? They’re about as free as Mas Selamat.

Someone needs to pay for their rising petrol and COE costs. And that’s YOU. In the end, retailers and F&B outlets increase the amount they charge you, in order to pay their suppliers. It doesn’t matter whether you bought private transport or not; you’re paying for it.

 

4. You Can’t Afford a Home

And now we come to the most important point. Unless you intend your entire family to live like squirrels, you pretty much need a house. If you’re rich, hey, no issue. But if you’re a young couple…don’t take offence, but I’m glad I’m not you.

When you buy a first house, that’s going to be a loan you’ll be paying for…how long? 15 years? 30 years? And with the out of control cash over valuation (COV) and rising per square foot costs, I’ll tell you what you’ll pay: Too much. If you buy a house in this overheated market, you risk prolonged, crippling debt. And while you’re struggling to pay it, prices all around you are rising.

Welcome to life on Nightmare mode.

 

 

And even if you already own a house, don’t assume you’re completely safe. Remember what I said about inflation outstripping your savings and CPF? Well what happens if your retirement fund burns out, and you need to downgrade?

I hope you’re okay with buying a smaller flat that’s $100,000 more than your previous one. Even if your former home’s value appreciated, the profit is going to be devoured by the monstrous cost of your new place.

 

What Can You Do?

In the next article, I’ll explore what means you can use to fight inflation. Ninjas and death robots may be involved, along with constructive suggestions like visiting SmartLoans.sg. There’s hope yet!

Image Credits:
MCYS Singapore, danielmoyle, futureshape, alex.ch, Geroithe

How are you currently affected by inflation? Comment and let us know!

Get more Personal Finance tips and tricks on www.MoneySmart.sg

Click to Compare Singapore Home Loans, Car Insurance and Credit Cards on our other sites.



More From MoneySmart
Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • No apology, but Noy seeks understanding
    No apology, but Noy seeks understanding

    There was no apology, but President Aquino yesterday expressed regret, took “full responsibility” and appealed to the nation for “deepest understanding” for the Jan. 25 Mamasapano raid in which dozens died, including 44 police Special Action Force (SAF) commandos. “To every Filipino who has felt failure or has been hurt because of the events related to this operation, it is with abiding humility that I ask for your deepest understanding,” Aquino said in a speech before the 246 new graduates of …

  • MVP on endorsement: Thanks, I’m no politician
    MVP on endorsement: Thanks, I’m no politician

    Businessman Manuel V. Pangilinan is grateful for Sen. Miriam Defensor-Santiago’s praise and presidential endorsement, but says he is not a politician. In an interview on the sidelines of the launch of the search for The Outstanding Young Men (TOYM) of the Philippines 2015 Wednesday night, Pangilinan dismissed the idea of running for president in the 2016 elections. “I’m not a politician, I’m just an ordinary business person,” he added. Santiago endorsed Pangilinan as a presidential candidate …

  • No Lenten break in operations vs lawless groups – AFP
    No Lenten break in operations vs lawless groups – AFP

    The Armed Forces of the Philippines (AFP) is not suspending its offensive against the Abu Sayyaf, New People’s Army (NPA) and other lawless groups during the Holy Week, an official said yesterday. Lt. Col. Harold Cabunoc, AFP public affairs office chief, said the AFP leadership is leaving it up to area and division commanders whether to raise the alert status in preparation for the Holy Week. Those deployed in areas where there are ongoing law enforcement operations against terrorist groups …

  • Probe harassment vs human rights lawyer, CA orders AFP
    Probe harassment vs human rights lawyer, CA orders AFP

    The Court of Appeals (CA) has ordered the Armed Forces of the Philippines (AFP) to investigate a human rights lawyer’s claim of harassment, including surveillance, by several military officers. In a 22-page decision, the former Special Sixth Division of the appellate court granted the petition for writ of amparo and habeas data of Maria Catherine Dannug-Salucon. The CA ordered the AFP to identify the officers behind the surveillance and file charges against them. The CA ruling said …

  • Noy vows to dismantle bata-bata system in PNP
    Noy vows to dismantle bata-bata system in PNP

    President Aquino vowed yesterday to dismantle the culture of factionalism or the bata-bata system within the Philippine National Police as he continued the search for the next PNP chief. Speaking at the Philippine National Police Academy (PNPA) commencement exercises here, the President said the country needed solidarity among leaders and members of the police force so that the policemen would be effective protectors of Filipinos. “Our challenge to the next chief of our national police force: …

  • Envoy to expats: Retire, invest in Phl
    Envoy to expats: Retire, invest in Phl

    Retire and invest in real estate in the Philippines, especially now that the country has made it to the top 10 retirement destinations in the world. This is the message being spread by the Philippine embassy in Washington, with Ambassador Jose Cuisia Jr. leading the refrain in meetings with various Filipino-American communities in the US. In his talks, Cuisia said that an affordable cost of living as well as warm climate and people are just some of the things that make the Philippines a top …

  • PNPA spotlight falls on Ampatuan grandson
    PNPA spotlight falls on Ampatuan grandson

    The stigma of being a namesake of the principal suspect in the 2009 Maguindanao massacre did not prevent Cadet First Class Andal Ampatuan III from entering and graduating from the Philippine National Police Academy (PNPA). Ampatuan III, now with a rank of police inspector, is a grandson of former Maguindanao governor Andal Ampatuan Sr. The younger Ampatuan was among the 246 graduates of the PNPA “Lakandula” Class of 2015. Ampatuan III’s mother is Bai Rebecca Ampatuan, a daughter of the …

  • Southwest transport terminal construction start still in limbo

    The construction of the country’s first intermodal transport facility is in limbo as both the government and the winning private concessionaire are waiting on each other before finally pushing through with the contract signing. Transportation Secretary Joseph Emilio Abaya said the ongoing titling of the project site for the R2.5-billion Integrated Transport System (ITS) Southwest Terminal should not delay the concession agreement signing, which has been indefinitely postponed since February …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options