Posts Tagged ‘long rants’
Note: I have not been able to update this blog as of late due to increasing work commitments. Loyal readers (and I personally thank you for that) should check this blog much less often for updates. Reader comments may be unaddressed for some time.This is likely to be the last post you see for a long time (I will be coming back eventually). A big thank you to those who have been reading this blog.
It was reported recently that the year-on-year inflation rate in Aug 2010 was 3.3%. At first glance this may not seem unusual. After all, Singapore is projected to achieve double-digit GDP growth for this year; some 20% growth is not out of question. It is perhaps with this in mind that the government has argued that letting in more foreign workers is crucial to prevent the economy from overheating. Singaporeans are told that unless more foreigners (whom are willing to work for lower pay) are allowed in, inflation will climb even more sharply higher. But a more in-depth analysis of the factors behind this inflation appears to undermine that argument.
Housing prices have always been a hot topic for discussion amongst Singaporeans. Both academics and netizens have written extensively on the relentless rising cost of living due to housing price inflation. In a footnote to a 2008 paper on Singapore’s policy responses to ageing and retirement, Prof Mukul Asher cites a 2007 Citi memo (which I have unfortunately not been able to unearth) authored by Dr Chua Hak Bin arguing that Singapore’s inflation rate was severely understated primarily due to the way housing inflation was calculated:
Chua (2007b) has argued that the inﬂation rate in Singapore, as measured by the consumer price index, is signiﬁcantly understated, primarily because of the way the housing component is incorporated.
One of the bigger mysteries in Singapore is that although public housing prices have gone through the roof, inflation has not. Why should this be so, especially since home-ownership rates in Singapore is one of the highest in the world (88.8% as of 2009). What determines how housing prices in Singapore affects the inflation rate? To answer this question, we must examine how housing prices are factored in the consumer price index (CPI). This may come as a surprise to some, but housing prices in Singapore are not reflected in the CPI.
Recently there has been some discussion concerning whether the economic malaise Americans are currently undergoing is structural or cyclical in nature. The former view holds that current high unemployment rate about 9.5% is here to stay whereas the latter holds that after a period of painful credit de-leveraging by America’s indebted households businesses, things will simply be back to business.
Now personally not too long ago I believed the problem was cyclical, namely that after the recession is over we should see an uptick in employment along with output and unemployment will decrease back to below 5%. But lately, some worrying signs have emerged that structural unemployment may be here to stay.
In early 2007, economist Dr Chua Hak Bin published an essay titled Singapore Economy: The New and the Dual. For many who remember 2007, it was a year of strong economic growth, as well as a year when Singapore’s ministers argued that robust economic growth justified their own outrageous salary hikes. But that would not be the focus of this post, instead it would be on thesis/theory of the dual economy.
What is the dual economy thesis? Why does it matter? In this post, I will argue that the best way to reconcile Singapore’s recent and startling growth with the perceived lack of “trickle-down” effect to the general population would be to accept some form of this theory.
Anyone who has been following the news recently might have been shocked at the rate of economic growth Singapore is projected to achieve for the year. On July 15th, the headlines of the ST screamed the following at its readers:
This post was originally supposed to be titled “Do HDB home owners benefit in any way from property price hikes?” and was in response to a conversation I had with a friend on whether Singaporean home-owners can be said to benefit from rising property prices. Since then, however, I have decided to expand upon it to include other considerations.
Qn: Does anyone benefit from relentlessly rising HDB flat prices?
In light of recent news that HDB resale prices have increased again this quarter, such a development should certainly give Singaporeans pause for concern, if only because rising prices sometimes do portend a growing housing bubble. However the subject of this post would not be whether the current housing price increases is indicative of a speculative bubble, as I’m not in the business nor possess the expertise to discern one in advance. Home seekers for sure are disadvantaged by rising prices. But really, can fast growing home prices be beneficial to anyone?
The simplest answer, and the most obvious one would be HDB home owners, as my friend has said. These folks whom are either fully-paid owners or in the process of paying off their mortgages have “locked-in” a fixed price for their houses, and any price appreciation would only mean that their total wealth is increasing. But this answer ignores a few important points. How exactly can a home owner tap increasing housing equity?
Here are some examples of such quotes (thanks TOC):
I don’t want whining Singapore boys. They are not mature even though they have done national service and are over 22 years old when they take up undergraduate studies.
PHILIP YEO, EX-CHAIRMAN, A-STAR (Straits Times, 2005)
[A] well-educated university graduate who works for a multinational company should not be bemoaning about the Government and get on with the challenges in life.
MP FOR ANG MO KIO GRC, WEE SIEW KIM (Straits Times, 2005)
Singaporeans are champion grumblers.
MM LEE KUAN YEW, (National Geographic, Jan 2010)
The problem of choosy workers is still with us.
THEN-MINISTER OF STATE FOR MANPOWER, NG ENG HEN (MOM, 2003)
Why is this behaviour amongst the ruling party leaders becoming more widespread? Why are Singaporeans forever told to work more efficiently for lower pay? For a long time most people, chiefly netizens, have fingered high ministerial salaries (the highest in the world) and a sheltered life with little threat of political opposition, coupled with extremely low tolerance for criticism (“thin-skinned”) necessary for a healthy democracy to function as probable causes. A recent paper highlighted by Harvard Business Review appears to confirm such a belief.
Thinkfamily, a campaign started by the National Family Council, which is under the Ministry of Community Development, Youth and Sports (MCYS), recently released a new ad on filial piety.