>LAST month the Monetary Authority of Singapore moved to soften the effects of creeping inflation by permitting the dollar to rise faster within a narrow band. It acknowledged that pressures on price stability would persist, owing to supply problems. Coupled with the rising oil and commodity prices worldwide, the central bank was acting to keep business costs within bounds, considering the high import content in manufacture and consumables. The central bank projected inflation to rise to between 2 per cent and 3 per cent next year, against an earlier forecast of under 2 per cent. More revealing was the adjustment for this year, to between 1 per cent and 1.5 per cent, against the old 0.5 per cent to 1.5 per cent range. These are not numbers to get agitated over, despite the high adjustment margins. The dollar's higher purchasing power to dampen imported inflation is yet to be evaluated fully.
But macro-stability is one side of the picture, albeit the fundamentally important one. Social discontent is the other side of the equation, arising from what would look to many ordinary folks like endless price increases for food items. There is no question about which of these conditions the Government has to be watchful about, probably within the next one year. Business can roll with the punches, in most cases. Not people on modest fixed incomes. They have little margin to adjust to. The lowest 20 per cent of income earners are affected the most by creeping inflation because of the large food and transport components in their spending, compared with higher income groups. For several months now rises in living costs, due in part to the new GST rate of 7 per cent that took effect in July, have shown no abatement. The food component of the consumer price index for September rose 3.7 per cent even as the overall number for living costs was down by 0.3 per cent month on month.
Can relief be had? While supply contractions in breadbasket regions, like Australia, are an underlying factor, the trigger-happy reaction of grocers, food suppliers and vendors here has to be examined more critically. They are not shy to take advantage of the fact that GST, rent and wage increases and oil price - the most convenient blame factor - came in quick succession. There is no bar on price rises in a free market, short of consumer resistance. But over food? From food, the price spiral will extend to non-food items before long. The Consumers Association is the only price monitor Singaporeans can look to in a time like this. It has not made its presence felt in this price round. The Competition Commission has also to be alert to price-fixing in commerce.
