Saturday 15 October 2022

Cost of Living: $1.5 billion support package to help Singaporeans cope with inflation; 2.5 million people to get up to $500 cash in December 2022

$1.5 billion Support Package builds on the support measures announced in Budget 2022, April 2022 and June 2022
By Hariz Baharudin and Goh Yan Han, The Straits Times, 14 Oct 2022

A new $1.5 billion support package will give Singaporean households additional help to deal with rising prices, with more aid going to lower to middle-income groups, Deputy Prime Minister Lawrence Wong announced on Friday.

Some 2.5 million eligible adult Singaporeans will receive a special cost-of-living payment of up to $500 in December, as part of the package.

They will get the payment together with the Goods and Services Tax (GST) Assurance Package cash payout that was announced at Budget 2022 to offset the impact of the upcoming one percentage point hike in GST from 7 to 8 per cent on Jan 1, 2023.

Every Singaporean household will also get additional Community Development Council (CDC) vouchers worth $100 next January. This means that together with the $200 CDC vouchers announced during the Budget this year, a total of $300 of such vouchers will be given out then.

The Ministry of Education will also increase the income eligibility thresholds for financial assistance schemes to defray school expenses for more students from January 2023. It will also enhance the bursary quantum for full-time Institute of Technical Education (ITE) students.

Mr Wong, who is also Finance Minister, said the latest measures have been designed with two groups of Singaporeans in mind who have been affected by higher inflation - lower-income Singaporeans and elderly retirees with no income from work.

Those earning less would be more disproportionately impacted because their wages may not rise sufficiently to cope with higher prices, said Mr Wong, adding that the older retirees would also be negatively impacted because they do not have incomes and have to deal with higher prices.

“That is why we have been monitoring the situation with respect to these different segments of Singaporeans, and the additional spending that they will have to incur,” he added.

The latest support package, together with earlier measures announced at the Budget as well as in April and June 2022, will fully cover the increase in cost of living for lower-income households on average, said the Ministry of Finance (MOF).

The package will also fully cover more than half of the increase in cost of living for middle-income households on average this year, the ministry added.

Full year inflation for 2022 is expected to come in at 6 per cent, Mr Wong said.

The Monetary Authority of Singapore had, earlier on Friday, said there was considerable uncertainty around the outlook for both inflation and growth, with core inflation set to remain high in the first half of 2023.

MOF said more support will also be given to help people deal with rising transport costs.

On Wednesday, it was announced that the Government will provide an additional subsidy of about $200 million to cover the 10.6 per cent fare increase that will be carried over to future fare review exercises.

"This additional subsidy helps to mitigate the impact of the fare increase on commuters and pay for higher costs of providing public transport services due to the increase in energy prices, manpower costs and inflation," said MOF.

Additionally, 600,000 public transport vouchers worth $30 each will be given to eligible Singaporean households, which can be used to top up fare cards or buy public transport concession passes.

MOF said there will be no draw on past reserves for the new support package. It will be funded by the better-than-expected fiscal out-turn in the first half of this financial year, which began in April.

The ministry added that the Omicron variant of Covid-19 was milder than expected, enabling more sectors of the economy to open up in tandem, boosting the nation's economic recovery.

The support package comes amid rising inflation, it noted. While supply chain frictions have eased slightly, the ongoing conflict in Ukraine and geopolitical tensions continue to put pressure on the prices of goods and services.

"As a small, open economy, Singapore is particularly susceptible to imported price pressures, through channels such as food and energy. Domestically, a tight labour market continues to support strong wage growth," said MOF.

"As such, we must be prepared for inflation to stay elevated for some time."

On Friday, Mr Wong also said that there will be an update to the GST Assurance Package, in order to take into account higher than expected inflation.

Details on these changes will come in Budget 2023, and Mr Wong stressed that the Government is fully committed to cushioning the impact of the GST increase for all Singaporeans.

The GST rate will increase by one percentage point from 7 to 8 per cent on Jan 1, 2023, and by another percentage point to 9 per cent on Jan 1, 2024.