Hansard, 2011-02-18

PERMISSION TO MEMBERS TO BE ABSENT Under the provisions of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Members have been granted permission to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which they have been appointed) for the periods stated: Name From (2011) To (2011) Mr Tharman Shanmugaratnam 19 Feb 20 Feb Assoc. Prof. Koo Tsai Kee 21 Feb 21 Feb Assoc. Prof. Dr Muhammad Faishal Ibrahim 21 Feb 25 Feb Mr Lim Swee Say 24 Feb 26 Feb 12 Mar 15 Mar Mr Lim Hng Kiang 01 Mar 02 Mar Mr Wee Siew Kim 10 Mar 11 Mar Ms Denise Phua Lay Peng 27 Mar 02 Apr Mr Khaw Boon Wan 27 Mar 30 Mar

PERMISSION TO MEMBERS TO BE ABSENT ABDULLAH TARMUGI Speaker Parliament of Singapore

ORAL ANSWERS TO QUESTIONS [Mr Speaker in the Chair]

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE 1. Mr Hri Kumar Nair asked the Prime Minister what new strategies will the Government pursue to increase the fertility rate among Singaporeans.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE (for the Prime Minister): Mr Speaker, Sir, the Government made significant enhancements to the

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE Given that the enhancements to the Marriage and Parenthood package have been in place for just two and a half years, we should allow more time to assess the impact of these measures. The Government remains committed to supporting Singaporeans in getting married and having children, and we will review the package at an appropriate time in the future. I encourage our young Singaporeans to get married and start a family, and for those who are married, to have more children, so that they can experience the joys of parenthood.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE Marriage and Parenthood Package in August 2008 to provide Singaporeans with more support in getting married, and having and raising children. The enhancements covered a broad range of measures, such as increased maternity and childcare leave, increased Baby Bonus cash gift and co-savings, and increased childcare subsidies. Overall, the package sought to create a more pro-family environment for Singaporean couples.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE Supplementary question, Sir. I thank the Deputy Prime Minister for his answer. May I ask the Deputy Prime Minister whether the reduction in the Total Fertility Rate (TFR) is on account of changing priorities or mindsets and, if that is the case, whether he considers increasing financial incentives will solve the issue?

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE Mr Speaker, Sir, I think the issue is far more complex than just putting in more money or encouraging people to have babies. As Mr Hri Kumar has pointed out, we have seen a change in values and mindsets in the way people perceive marriage and having children. If Members remember: in my parents' generation, having half a dozen to a dozen children was practically the norm. Then, for their children, because of the programme that the Government rolled

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE out at that time, many had at least two children. Now, the younger ones would think about giving the best to their children. So, they conserve whatever resources they have to try to give the best to the children and, therefore, have fewer children. A bigger mindset change is really in the way people think about their lives. When they find a job, there are so many other priorities that they have in mind, such as building their careers, saving enough money and so on, and so as a result, we see an increase in the singlehood rate in our population, particularly among those who are of a marriageable age. The last Population Census of 2010 had shown that there were increases in the singlehood rates for both men and women.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE The Deputy Prime Minister mentioned that the various incentives were introduced almost two and a half years ago, and that we should give them more time before doing a review. My first supplementary question is: when will the review likely be done? Second supplementary question is: I am sure the Ministry would have much information and data to understand what are the causes for the declining TFR. Perhaps the Deputy Prime Minister could share with us what the main causes are so that the right strategies, incentives and resources can then be allocated to arrest this very complicated issue, which involves many aspects across many Ministries, be it education, housing, and so on.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE Sir, a review will be done at the appropriate time. If the Member asks me when that will be, I cannot tell him for now. Since it is just two and a half years ago that we had introduced the improved package, it is really too soon for me to say, "by this particular date, we will do a review". There are many reasons people choose to have children, have more children, or choose to not have children or get married

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE I do not think I am able to do justice to the question raised by Mr Seah in the next half an hour or one hour because the issue is really far more complex. Every human being is different. Even for societies that we have studied, there is no one, single method through which TFR could be raised. We know some countries spend quite a bit of money and they have achieved a higher TFR. We also know of some countries that spend very little money and yet, they have a high TFR. Even at the individual level, we know some people can well afford to have many children but yet have very few. And some cannot afford to have children and yet have many. I do not think there is a single answer to deal with this issue, when we are dealing with human beings and talking about emotions and people's needs.

ORAL ANSWERS TO QUESTIONS - IMPACT OF GOVERNMENT MEASURES ON FERTILITY RATE IN SINGAPORE at all. There is no one answer to it and there is no one strategy that we can use. What we have tried to do is to help couples who have children or who want to start a family with some assistance either through childcare subsidies, maternity leave, income tax rebates or other measures. We think there is no single item for which we can say that by doing more of this or that, we will have more babies.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME 2. Mrs Mildred Tan asked the Minister for Manpower (a) what is the number of people above 55 years of age who do not have the Minimum Sum in their CPF accounts; and (b) what is the progress of the CPF Minimum Sum Topping Up Scheme.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME Sir, the CPF system not only provides for the retirement needs but also the housing and healthcare needs of its members. If we include property pledge,

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME The cash savings in the Ordinary and Special Accounts which contribute towards the Minimum Sum-attainment represent only part of members’ retirement savings, as almost half of CPF savings are invested in housing. Adding back sums withdrawn for housing, the average savings of active members who turned 55 in 2010 will be $226,000, excluding balances in the Medisave Account. Correspondingly, if Ordinary Account monies were not used for housing, the Minimum Sum-attainment would have been about 60% for active members who turned 55 in 2010. The use of CPF for housing has helped nine in 10 Singaporeans own their own homes — an important and valuable asset that contributes towards retirement adequacy as members have various options to monetise their housing asset and to generate more retirement income if necessary.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME In addition, the CPF also helps members save for medical needs in their old age through Medisave which has an average balance of $28,000 for active members who turned 55 in 2010. This is also an improvement over 2009, despite liberalising the usage of Medisave over the years. The CPF has served Singaporeans well.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME To allow members to save more in their CPF, we have been steadily opening up the Minimum Sum Topping Up Scheme in recent years to encourage retirement savings. For example, we have raised the top-up limit, increased tax relief for givers, and expanded the list of eligible recipients.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME As a result of the relaxation of topping-up rules and CPF Board’s promotional efforts, the number and amount of top-ups have increased almost five folds over the last five years. In 2010, there were 30,000 top-up transactions totaling $250 million. We will continue to encourage members to top up their CPF savings to better provide for their retirement and healthcare.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME for the cohort who turned 55 in 2010, over 40% of active CPF members attained their cohort Minimum Sum set at $123,000 even after lump sum withdrawal at 55. This is an improvement over the 37% attained in 2009 which had a lower Minimum Sum requirement then.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME I just wanted to ask whether more could be done in terms of public education for the retirement top-up funds.

ORAL ANSWERS TO QUESTIONS - CPF MINIMUM SUM TOPPING UP SCHEME Sir, I agree with the Member that we can do more in publicising and educating our CPF members on the various top-up opportunities and the benefits of topping up their accounts. CPF has been doing so with our community organisations. We are reaching out to CPF members through grassroots and community leaders, through our programmes and through our workshops, seminars and roadshows to explain to members how they can make top-ups, why they ought to make top-ups when they can and how the top-ups will benefit them. We will continue to do more of those.

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE 3. Mr Viswa Sadasivan asked the Minister for Manpower whether the CPF Act provides for extenuating circumstances, other than for housing and investment, whereby a member is allowed to draw his CPF monies before his official retirement age.

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE Sir, upon reaching age 55, and before he reaches his draw-down age currently set at 62, a member is already allowed to withdraw his CPF savings in the Ordinary Account and

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE Special Account after setting aside both the Minimum Sum and the Medisave required amount. Medisave Account savings above the Medisave Minimum Sum can also be withdrawn upon turning 55.

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE The CPF Act also provides for the early withdrawal of CPF savings in four specific situations. Firstly, for members who are terminally ill; secondly, for members with medical conditions rendering them permanently unfit for any employment; thirdly, for members with severely impaired life expectancies, and lastly, for members lacking mental capacity. The application for withdrawal under each of these situations would have to be certified by CPF Board’s panel of doctors and approved by the Board.

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE Members who are certified by the doctors as terminally ill will be allowed to withdraw all their Ordinary and Special Account savings without setting aside the Minimum Sum. As such members are likely to require their Medisave savings for medical expenses, they are required to retain their savings in the Medisave Account up to the Medisave Minimum Sum, but any excess may be withdrawn.

ORAL ANSWERS TO QUESTIONS - CPF WITHDRAWAL BEFORE RETIREMENT AGE In the other cases, the member concerned will be allowed to make a lump-sum withdrawal from his Ordinary and Special Account savings after setting aside a reduced Minimum Sum and topping up his Medisave Account, up to the Medisave Minimum Sum. Medisave savings above the Medisave Minimum Sum can also be withdrawn as a lump sum.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS 4. Mr Hri Kumar Nair asked the Minister for the Environment and Water Resources how his Ministry determines the market rent for hawker stalls and what accounts for the disparity in market rents between stalls in different locations.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Mr Speaker, Sir, the NEA engages a professional valuer to assess the market rent for non-subsidised hawker stalls in markets and hawker centres. Other than the prevailing economic conditions and size of the stall, the valuer will also consider the location of the centre as well as factors such as the accessibility and frontage of the stall within the centre when assessing the market rent for the stalls.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Supplementary question, Sir. I often get complaints from hawkers who say that they are paying rents higher than a comparable stall elsewhere. May I ask the Minister whether the rents are publicly available and, if not, would he consider publishing them for greater comparison and outcomes?

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Sir, as I have mentioned in my reply, even within centres, there could be different market rents depending on the location of the stall in question. The market rents are not made available at this point in time because they are charged directly to the stallholder. Tender rents are available because when the tender goes out, they put in a bid, and we will decide on which bids to accept. I will consider the Member's proposal as to whether we want to make the rental data available. The point is that there will be variations even within centres and across different centres.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Mr Speaker, Sir, I would like to ask if the Minister takes into account the subletting rent of the stalls in determining the market rent. And does the Minister know there is a difference between the NEA market rent and the subletting rent? Thirdly, if the Minister is aware that there

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS is such a difference, is he aware if this difference is affecting the operating costs of the food stall operator?

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Mr Speaker, Sir, I assume the Member is referring to legal subletting. Subletting rental is again subjected to market forces and for the person who is prepared to take the stall to decide. As I mentioned in my reply, for any stall that is to be rented out at market rate, it is given to a valuer to assess for us. He will take all the available information into account. As to whether or not he takes into account the prevailing subletting rentals, this is best left to the professional valuer to decide.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Supplementary question, Sir. Under what conditions will the Ministry allow for subletting? I think we should not allow an individual to profit. If you rent the stall from the Ministry, then you should run the stall and not use it as leverage for higher profits, through subletting.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Subletting is not allowed for subsidised stalls.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS 2.47 pm

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Order. End of Question time. I propose to take the break now. I suspend the sitting and will take the Chair again at 3.30 pm.

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS Sitting accordingly suspended

ORAL ANSWERS TO QUESTIONS - RENTAL RATES FOR HAWKER STALLS at 2.47 pm until 3.30 pm.

BUDGET Sitting resumed at 3.30 pm

BUDGET - ANNUAL BUDGET STATEMENT Mr Speaker, Sir, I beg to move,

BUDGET - ANNUAL BUDGET STATEMENT "That Parliament approves the financial policy of the Government for the financial year 1st April 2011 to 31st March 2012."

BUDGET - ANNUAL BUDGET STATEMENT Economic performance – an exceptional year

BUDGET - ANNUAL BUDGET STATEMENT Our economy has performed exceptionally well in the past year. After two weak years in 2008 and 2009, when growth was close to zero, our GDP grew by a record 14.5% in 2010. Unemployment is down to the levels seen in early 2008, before the crisis.

BUDGET - ANNUAL BUDGET STATEMENT We have recovered faster than most economies. The IMF has estimated how long various economies will take to get back to their potential GDP levels – in other words, their potential based on longer- term trends. Singapore had recovered fully from the crisis by the second quarter of 2010, like Taiwan, the two at the bottom of the chart [Chart 1* ]. Most of the other Asian economies either did so by the end of last year, or will get back to their potential levels in the course of this year. However, the outlook for the US, the Eurozone and Japan is challenging, with recovery from the crisis expected to take at least another four years.

BUDGET - ANNUAL BUDGET STATEMENT Our stronger recovery was partly a matter of good fortune, as global trade and confidence in Asia turned around. But it also reflected the way we prepared ourselves for the turn in the winds. We intervened during the crisis to help employers hold on to the workers they need and, in fact, help them hold on to the workers they felt they would need for the recovery. Trained up their workers, and prepared them to emerge fitter and stronger when the winds turned. We also helped workers who lost their jobs to get back into the workforce, by matching them to new employers quickly.

BUDGET - ANNUAL BUDGET STATEMENT Our companies made good use of the crisis measures, including the Jobs Credits, SPUR, and the Government’s loan guarantees under the Special Risk-Sharing Initiative (SRI). We were therefore ready to seize opportunities when the winds shifted. In short, our crisis strategy worked.

BUDGET - ANNUAL BUDGET STATEMENT 2011 outlook – opportunities and risks

BUDGET - ANNUAL BUDGET STATEMENT As we are now well past the rebound from the crisis, our economy will grow more slowly this year. But Singapore will continue to benefit from the global economic recovery, as well as the competitive edge that we have gained over the past few years.

BUDGET - ANNUAL BUDGET STATEMENT The external environment is however more complex this year. Growth in the emerging economies, which accounts for two-thirds of global growth, is expected to remain strong. However, these economies are also seeing a build-up of inflationary pressures. Food and other commodity prices have climbed sharply, because supply has been affected by harsh weather conditions while demand continues to grow in China and elsewhere. The political uncertainties in the Middle East have also driven oil prices up. There will be no early relief from these inflationary pressures. Further spikes in commodity prices could lower economic growth in Asia, if governments are forced to tighten domestic policies to control inflation.

BUDGET - ANNUAL BUDGET STATEMENT The recovery in the advanced economies, especially in the US, is picking up steam. Business investment has restarted and manufacturing activity is strengthening. These are the positives. However, these are only cyclical improvements, while growth prospects continue to be weighed down by structural difficulties. In particular, a combination of high long-term unemployment, weak housing markets and large household debts will depress consumption for some

BUDGET - ANNUAL BUDGET STATEMENT years. Heavy budget cutting in Europe, the UK and Japan, and the withdrawal of the fiscal stimulus in the US later this year, will also dampen growth. In addition, there remain risks in global finance. Problems surrounding sovereign debt in parts of Europe are causing concern.

BUDGET - ANNUAL BUDGET STATEMENT We will have to watch the risks and be ready to respond if global growth falters. Overall, however, we face a positive environment for Singapore. The Government expects Singapore’s economy to grow by between 4% and 6% in 2011. This is still above our estimated trend growth of 3% to 5% for the next 10 years, and reflects the continuing momentum in the economy. Investments and activities are still flowing into Singapore, attracted especially by opportunities in Asia. The record investments that we saw in 2010 alone are not only higher in quantum but of an exceptionally higher quality, and are expected to create 21,300 new skilled jobs once these projects are fully realised. These are investments in 2010 alone, which are expected to create 21,300 high quality jobs when the projects materialise.

BUDGET - ANNUAL BUDGET STATEMENT However, inflation is a concern for everyone this year, and especially for low-income families. CPI inflation was 4.6% year-on-year in December 2010. We expect inflation to be around 3% to 4% this year, higher in the first half before moderating later in the year. However, a large part of the CPI inflation increase can be explained by higher COE premiums and the higher imputed values of owner-occupied homes, compared to a year ago. For the majority of households, these increases, the COE premium increases and higher imputed values of owner-occupied homes do not mean substantially higher cash outlays. The Monetary Authority of Singapore’s (MAS) core inflation measure, which excludes the effects of these two factors on the CPI, is projected at 2% to 3% for 2011 as a whole.

BUDGET - ANNUAL BUDGET STATEMENT < Fiscal position for FY2010

BUDGET - ANNUAL BUDGET STATEMENT We had originally estimated an Overall Budget Deficit of $3 billion or about 1% of GDP for FY2010. Given the much improved economic performance, we now expect the overall budget to be close to balanced, with a small deficit of $0.3 billion or 0.1% of GDP.

BUDGET - ANNUAL BUDGET STATEMENT Putting back into past reserves

BUDGET - ANNUAL BUDGET STATEMENT Members will recall that the Government had sought and obtained the President’s approval to draw $4.9 billion from Past Reserves, to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative under the Resilience Package. We were in the midst of a global crisis of unprecedented scale. Our access to Past Reserves gave us the resources and confidence to deal decisively with the downturn and to be prepared to take further measures if the situation worsened. In the event the amount drawn for these two schemes was $4 billion, less than expected.

BUDGET - ANNUAL BUDGET STATEMENT We have recovered well from the crisis, putting our fiscal position on stronger footing. With the much lower deficit we achieved last year, as well as our good Budget position for this year, we should be able to achieve an overall budget surplus during the current term of Government. We have thus decided to put back into Past Reserves the $4 billion that we had drawn earlier for the Resilience

BUDGET - ANNUAL BUDGET STATEMENT Package. I have informed the President of our decision.

BUDGET - ANNUAL BUDGET STATEMENT There is no legal or constitutional obligation for the Government to return to Past Reserves any amount drawn. However, it is the responsible and prudent thing to do, once a Government has secured a stable fiscal position within its term. This is the way to uphold the philosophy that has enabled us to build up and maintain our reserves, and derive from it income each year to meet our strategic needs.

BUDGET - ANNUAL BUDGET STATEMENT Budget 2011: growing incomes, strengthening our society

BUDGET - ANNUAL BUDGET STATEMENT We are taking major steps in this year’s Budget to strengthen our economy and society for the future. The Budget has two objectives.

BUDGET - ANNUAL BUDGET STATEMENT First, we must grow incomes for all Singaporeans. We aim to raise incomes by 30% in real terms over this decade. However, we can only achieve this if we grow our economy, upgrade our businesses and invest in raising skills, craftsmanship and the quality of service in every job. That is the only way we can improve incomes and living standards, including for those at the lower end of the income ladder.

BUDGET - ANNUAL BUDGET STATEMENT This year’s Budget doubles our commitments to achieving this objective. We will significantly enhance support for companies to invest in workers’ skills and productivity, and to help Singaporeans upgrade. We will also boost assistance for our companies to venture abroad, and to entrench high-value economic clusters in Singapore.

BUDGET - ANNUAL BUDGET STATEMENT Together, these efforts comprise our core economic agenda. If we succeed, we will make the breakthrough into becoming a first-rate developed economy a decade from now, with advanced skills and higher

BUDGET - ANNUAL BUDGET STATEMENT incomes, and a larger base of globally competitive enterprises.

BUDGET - ANNUAL BUDGET STATEMENT Our second objective is to strengthen our society. We will take further measures to ensure an inclusive society – where everyone can contribute and share in the country’s progress, regardless of where they start from. The Budget will introduce tax measures to expand support for lower- and middle-income Singaporeans. We will help their children get the best start in life through education, from pre-school through to tertiary education. We will enhance grants to help lower-income Singaporeans own their homes. We will commit substantially more resources towards developing a top quality long-term care sector for the elderly. We will also raise the quality of life for all Singaporeans, by investing in the rejuvenation of our HDB neighbourhoods and developing a vibrant and widely accessible arts and culture scene.

BUDGET - ANNUAL BUDGET STATEMENT Finally, we will also be able to share surpluses with Singaporeans this year. As I explained earlier, we have first, as a matter of prudence, used our surpluses to put back in Past Reserves what we had drawn during the crisis. Next, in Budget 2011, we are moving ahead with major measures for our future – to build up a vibrant economy and enable an inclusive society. However, our strong Budget also allows us to provide an additional package of benefits to all Singaporeans this year.

BUDGET - ANNUAL BUDGET STATEMENT This is a bonus, but it is not merely incidental part of our fiscal policy approach. It is how we share and redistribute the benefits of growth with Singaporeans, while keeping to fiscal discipline. This package of surplus-sharing will also help most of our lower- and middle-income households to offset their higher costs of living this year.

BUDGET - ANNUAL BUDGET STATEMENT Dealing with inflation

BUDGET - ANNUAL BUDGET STATEMENT However, while we are able to share surpluses with Singaporeans this year,

BUDGET - ANNUAL BUDGET STATEMENT this is not the main way we deal with the rising cost of living. Let me briefly explain how we approach this problem of inflation.

BUDGET - ANNUAL BUDGET STATEMENT As a country that imports almost all we consume, we will always be vulnerable to inflation abroad. This time round, it is mainly food, utilities and other fuel-related charges that are concerning most Singaporeans.

BUDGET - ANNUAL BUDGET STATEMENT Our first approach is to seek to moderate medium-term inflationary pressures through the Singapore dollar exchange rate policy of the MAS. The MAS has permitted the Singapore dollar to appreciate against a basket of foreign currencies over the last 18 months, which has helped counter inflation in imported goods. However, using the exchange rate to offset sudden spikes in prices, such as what we have seen in oil prices over the last six months, would require a sharp appreciation of the Singapore dollar. This would disrupt our exporters.

BUDGET - ANNUAL BUDGET STATEMENT Second, the Government will stay alert to any attempts by businesses to profiteer or collude to raise prices excessively. This is unlikely to happen in most industries, because firms which raise prices excessively risk losing business to their competitors. Nevertheless, the Ministry of Trade and Industry (MTI) has been monitoring retail prices, and will be forming a group under Minister of State Lee Yi Shyan to keep a closer watch on any excessive price increases or anti-competitive practices. In fact, some of our businesses can also be angels. NTUC Fairprice has just cut prices of its house brand items by 5% till the end of May, and NTUC Foodfare has also announced that it will not increase the prices of basic beverages like tea and coffee at most of its outlets.

BUDGET - ANNUAL BUDGET STATEMENT The third way we can help Singaporeans with inflation is through our fiscal policies. We provide greater

BUDGET - ANNUAL BUDGET STATEMENT subsidies and benefits to those who need it the most, in health, education, housing and other areas. These are the permanent programmes, a permanent system of subsidies and grants. On top of these, there is more help for the needy through ComCare and a whole range of community-based programmes – just like the daily meal vouchers that Southwest CDC, using a donation from a local entrepreneur, has just expanded to reach out to 2,000 students living in the district.

BUDGET - ANNUAL BUDGET STATEMENT The final approach, however, is the most fundamental. We must continue to grow Singaporeans’ incomes, so that even after taking into account inflation, their real purchasing power increases. It is not possible to achieve this every year, but we must grow the real incomes of Singaporeans over time. This is indeed the first major strategy of this Budget.

BUDGET - ANNUAL BUDGET STATEMENT Growing incomes for all Singaporeans – sustaining growth

BUDGET - ANNUAL BUDGET STATEMENT To raise Singaporeans’ incomes over the next decade, we must first sustain our economic growth. Without a growing economy, no strategy can realistically raise incomes, whether for the average citizen or those at the lower end of the workforce.

BUDGET - ANNUAL BUDGET STATEMENT We expect Singapore to be able to sustain growth of 3% to 5% on average over the rest of the decade, lower than the 4% to 6% we had expected for the last decade. It is however not possible to achieve this steady rate of growth each year. We cannot avoid the impact of global recessions, but our strategy is to recover quickly each time. We also seize the opportunity to grow faster when global conditions are positive because we know that the economic cycle will eventually turn.

BUDGET - ANNUAL BUDGET STATEMENT By growing faster when conditions are right, we are not therefore going for

BUDGET - ANNUAL BUDGET STATEMENT growth for its own sake. It is the way for us to achieve an average growth that is in line with our longer-term potential, and thereby grow Singaporeans’ incomes on a sustainable basis.

BUDGET - ANNUAL BUDGET STATEMENT We saw this in the last decade. We had three recessions – in 2001, again from 2002 to 2003, and during the global financial crisis in 2009. Despite these recessions, we averaged creditable growth of 5.5% per annum over the decade. This was only possible because we grew well during the recoveries following each recession, making up for the periods of slow growth.

BUDGET - ANNUAL BUDGET STATEMENT Had we not seized opportunities and attracted investments vigorously after each storm, we would have done significantly worse than we actually did over the decade. Incomes of Singaporeans would have grown much more slowly or not at all, with the brunt of the difficulties being borne by those at the bottom.

BUDGET - ANNUAL BUDGET STATEMENT Consider what happened to low-income Singaporean workers at the 20th percentile of incomes. Their wages grew by about 23% in the last decade – 23% in nominal terms – or 5% in real terms. This is without taking into account the Workfare payments that have begun in the latter part of the decade since 2008. But virtually all the increase in their incomes – this increase of 23% in nominal terms or 5% in real terms – happened in the second half of the decade, when our economy grew well. It more than made up for the first half of the decade, when weak economic growth kept wages at the bottom stagnant [Annex A-1 *].

BUDGET - ANNUAL BUDGET STATEMENT Because we grew well in the second half of the decade, we brought unemployment down, raised demand for workers and enabled wages to pick up for many at the lower end of the workforce.

BUDGET - ANNUAL BUDGET STATEMENT The challenge of keeping jobs and growing incomes for low-skilled workers is ever-present. The reasons are well-known – competition from China and other emerging players has exerted downward pressure on wages of low-skilled workers around the world, at the same time that IT and other technologies have replaced many simpler jobs in factories, offices, stores and other work areas. It has led to stagnating or falling wages at the bottom end in most developed societies. In Asia, we see it happening in Japan; even in Korea, which has a competitive and dynamic economy, wages of those at the bottom end have fallen in real terms.

BUDGET - ANNUAL BUDGET STATEMENT Fortunately for us, we have been able to avoid a sustained decline, and achieved some growth in real incomes at the 20th percentile of workers over the last decade, unlike in many other economies. Further, we have created many more jobs. More of our people have joined the workforce, raising our participation rates closer to OECD levels. The result of avoiding a decline in wages and, in fact, achieving some real growth and creating more jobs has been higher household incomes, as more members of the family have been able to find work, including part-time jobs.