This Government will always uphold fiscal responsibility, says PM Lawrence Wong
By Wong Pei Ting, The Straits Times, 1 Mar 2025
The PAP Government will never take risks with Singaporeans’ lives and their future – this means ensuring that it keeps public finances healthy year after year and spending within its means, said Prime Minister Lawrence Wong.
PM Wong also cautioned against attempts to portray a healthy surplus as somehow detrimental to Singaporeans as he addressed criticism from opposition MPs about poor budget marksmanship.
“Let’s try not to put a wedge between the Government and the people... A strong fiscal position for Singapore is not at the expense of Singaporeans,” he said. “In fact, it benefits Singaporeans in so many ways, because we are able to invest more in Singaporeans.”
In an hour-long speech wrapping up the Budget debate on Feb 28, he also responded to the opposition’s suggestion that the Government had raised the goods and services tax earlier than it needed to, given an expected surplus of $6.4 billion for financial year 2024, compared with the $778 million that had earlier been projected.
Singapore is in a strong fiscal position today precisely because it took the necessary steps early in this term of government to raise revenues ahead of expected structural spending needs as the population ages, said PM Wong.
While the Republic was fighting the Covid-19 pandemic, it could already foresee spending needs going up on the horizon.
“This was 2020, 2021 – we had no way of knowing when the pandemic would end, how the virus would mutate, how many more new waves of infection would we face, how many more restrictions we have to impose, and how much deeper a fiscal hole we would end up with,” PM Wong said.
The authorities made the decision to proceed with the GST increase in Budget 2022, accompanied by enhancements to a package to delay the increase for most Singaporean households, when there were signs that the economy had stabilised.
“We must ask ourselves, do we want short-term populism or long-term stability?” PM Wong asked. “Do we want to kick the can down the road or take the hard but necessary decisions?”
With the GST increase in place, the Government has the additional revenues – mostly from those who are better off, foreigners and tourists – that it needs to improve healthcare infrastructure and take better care of seniors, he said.
Were it not for the GST hike, and unexpected upsides in corporate income tax collections, FY2024 would have ended in deficit, as would projections for FY2025, he added.
“That would have meant less funding for essential services, less support for our seniors and fewer resources to invest in our future,” he said.
“Basically, Singapore and Singaporeans would have ended up in a much weaker position.”
PM Wong refuted Leader of the Opposition and Workers’ Party (WP) chief Pritam Singh’s proposition that the GST hike had “turbocharged” inflation.
As Singapore is a small and open economy, inflation was driven primarily by global factors, such as war and supply chain disruptions, said the Prime Minister.
In the two years when GST was raised, price increases actually moderated, from 6.1 per cent in 2022 to 4.8 per cent in 2023 and 2.4 per cent in 2024, he pointed out.
He noted that in most countries, poor budget marksmanship refers to when governments severely overestimate revenue collections and underestimate expenditures.
This results in unfunded promises that a country cannot keep, because there is not enough money. Alternatively, it borrows to meet these commitments, thereby leaving a growing burden for the next generation.
This is not the case in Singapore, as the Republic practises responsible and prudent budgeting, PM Wong said.
Earlier in the debate, Mr Singh had called the Government’s fiscal projections “so unpredictable, but somehow always so healthy when elections have to be called”.
This point was echoed by Progress Singapore Party (PSP) Non-Constituency MP Leong Mun Wai, who said that “so much pain” had been inflicted on Singaporeans by the decision to raise GST in 2023 and 2024.
PM Wong said that, ultimately, it was not a matter of marksmanship, but a question of right or wrong fiscal principles.
“The WP and the PSP may think that we are being overly cautious in our projections, but this Government will never take risks with Singaporeans’ lives and future,” he said.
This includes raising revenues should new spending needs arise, he added.
On the charge by opposition MPs that the Government had been relying on temporary measures such as vouchers to deal with cost pressures instead of making structural reforms, PM Wong said that cost-of-living support and the SG60 package accounted for just 5 per cent of the Budget.
A far larger part of government spending is in structural programmes such as SkillsFuture to empower Singaporeans through skills and job training, he said.
“This will ensure Singaporeans do not just receive help, but are able to stand on their own feet and seize better opportunities for themselves and thrive in a rapidly changing world,” he said.
Objectively speaking, this has helped Singaporean households across different income levels achieve higher real income growth in the past decade than countries like the United States and Japan, he added.
For instance, the bottom 20 per cent of households here saw their wages rise 3.6 per cent per annum between 2013 and 2023, compared with 2.1 per cent in the US and minus 1.6 per cent in Japan.
Singapore’s fiscal approach has also stood it in good stead – while many countries use their tax revenues to service interest payments, the Republic instead receives an annual boost from its investment returns.
“Countries that have this luxury of investment returns are the ones that are endowed with oil and gas or some other natural resources – they have been blessed by the heavens with these endowments,” PM Wong said.
‘We have nothing, and yet we are in this position. It is truly unique, and it is a Singapore miracle.”
Singapore’s fiscal strength is a vital source of competitive advantage in these turbulent times, which look likely to get worse, said PM Wong.
He flagged the ongoing wars in Europe and the Middle East, and the possibility of conflict in Asia.
Today’s environment means global responses to these threats will sadly not be as well coordinated or effective as before, he added.
“But in Singapore, we know that if such shocks were to arise, we have the ability to respond swiftly to them, like we did during Covid-19,” he said.
“Our reserves and our fiscal strength will enable us to protect Singaporeans when it matters, and to turn adversity into opportunity.”
In a Facebook post in the evening, Senior Minister Lee Hsien Loong said Singapore must continue to spend prudently, so that it can tackle and recover from future challenges swiftly, as it did with Covid-19.
Reflecting on SG60 – the country’s 60th year of independence – SM Lee said the country’s strong fiscal footing has been built through the careful stewardship of the earlier generations. He said: “It gives us confidence to move forward sustainably, so that future generations can enjoy the fruits of Singapore’s progress.”
PM Wong said the Government’s approach has also achieved outcomes that reflect Singapore’s values as a society – one that is fair, prudent and progressive, where the better off contribute more to lift up those with less.
For instance, the bottom quintile of households receives $4 in benefits for every dollar of tax paid, while the top quintile of income earners receives 30 cents.
“There is no fiscal system in the world that can deliver perfect precision and equity. But I think we have found an approach in Singapore that works for us,” he said. “It’s not perfect, but we continue to make it better.”
At the end of the day, PM Wong said, Singaporeans will decide whether they prefer a government that underestimates needs and spends more from the reserves, leaving the country weaker, or one that steadfastly upholds fiscal responsibility and discipline so that current and future generations have the resources to handle unexpected challenges.
“We will continue to do our best to convince Singaporeans that ours is the right approach. It has served us well these last 60 years, and it will continue to keep Singapore on the right track in the years ahead,” he said.
GST hike did not ‘turbocharge’ inflation, says PM Wong as he acknowledges cost-of-living concerns
By Goh Yan Han, The Straits Times, 1 Mar 2025
The GST increase did not lead to a “turbocharging” of inflation, said Prime Minister Lawrence Wong, noting that price increases moderated after the tax rate was raised in 2023 and 2024.
PM Wong was responding to Leader of the Opposition Pritam Singh, who questioned during the Budget debate why the Government had gone ahead to raise the goods and services tax (GST), “thereby turbocharging inflation further”.
Inflation was driven primarily by global factors – war, supply chain disruptions and rising energy costs – and has since eased globally and in Singapore, he said on Feb 28.
PM Wong, who is also the Finance Minister, added that Singapore’s central bank assessed the GST increase to have a “transitory” impact on inflation. The tax rate was raised from 7 per cent to 9 per cent in two stages, in 2023 and 2024.
Inflation peaked in 2022 at 6.1 per cent, he said. It moderated in 2023 to 4.8 per cent, before coming down further in 2024 to 2.4 per cent.
“Where is the turbocharging?” he said. “Look, I know elections are approaching, but this Chamber is not an election rally. Let’s not get carried away by hyperbole and have a debate based on facts.”
The fact is that inflation has eased both globally and in Singapore, said PM Wong in his speech to round up the three-day debate on Budget 2025, which saw 57 MPs raise their concerns and suggestions.
He acknowledged that people are still concerned about cost pressures, and that it takes time to adjust to new price realities.
This concern is not unique to Singapore, as it is felt across many other advanced economies where the headline economic indicators are positive but sentiments poor, added PM Wong.
“We understand these concerns, and that’s why we are continuing to provide temporary help measures,” he said. These include more CDC vouchers and the voucher component in the SG60 package.
“We will continue to provide cost-of-living support for as long as needed, and within our means,” he added.
Addressing points raised by Workers’ Party and Progress Singapore Party (PSP) MPs, PM Wong said they “appear to be unhappy and displeased” that the Government is providing vouchers to help Singaporeans with cost of living.
“They suggest that the Government is relying solely on vouchers to help with the cost of living, but we’ve never said that. These are temporary help measures. They are not long-term solutions,” he said.
The cost-of-living measures and SG60 package account for about 5 per cent of the 2025 Budget, he noted. A “much larger” part of the Government’s spending is in structural programmes, in particular to equip and empower Singaporeans through education and skills and job training.
“As we have repeatedly emphasised, the more durable, the most sustainable way to tackle cost of living is to ensure that Singaporeans enjoy higher real incomes, and that must be supported by a strong economy and productivity gains. That remains the key thrust of our approach,” said PM Wong.
While Singapore has done relatively well, he acknowledged that the day-to-day lived realities for Singaporeans may be different.
This is why the Government has taken steps to strengthen the social support system as part of the Forward Singapore engagement exercise, to provide greater assurance to Singaporeans across every life stage, he said.
Rising social spending
PM Wong also responded to calls for the Government to make bolder moves on social policies, including PSP Non-Constituency MP Hazel Poa’s point on the need to put more emphasis on social rather than economic considerations.
He said the Government is prepared to spend more where necessary.
“But it’s equally if not more important to get the policies right and to ensure the overall system is fiscally sound and sustainable,” he said.
PM Wong noted that spending on social development is already more than what is spent on the economy and security combined – and is expected to continue growing in the coming years.
“Ultimately, a strong social support system should not be reliant on the Government alone, even though the Government is going to do more, but it cannot be reliant on the Government alone. We will do more, but our actions must also be complemented by individual and community responsibility.”
The Government has taken steps to progressively strengthen the key pillars of Singapore’s social system and social compact, he added.
These include universal access to primary school, the Central Provident Fund (CPF) scheme for retirement, government subsidies for healthcare and the HDB system for housing.
“And we have progressively enhanced these pillars,” said PM Wong, pointing to schemes that target specific groups such as Workfare for lower-wage workers, Silver Support for vulnerable seniors, and the broader SkillsFuture scheme for all workers.
Adjustments have been made over the years to continue providing assurance to Singaporeans, he noted.
For example, the CPF system – which turns 70 in 2025, at a time when many pension systems in other countries are struggling with sustainability – allows Singaporeans to save for their own retirement with support from their employers.
Saving for retirement is not left to individuals alone, as families are encouraged to help their loved ones save more, while the Government provides risk-free interest rates with extra interest for lower balances.
The Government will continue to review, fine-tune and improve the CPF system to better meet the needs of seniors and to prepare for a future with increased longevity and life expectancy, said PM Wong.
Other areas of social support the Government is looking into include for those with disabilities, caregivers as well as leave arrangements for families.
“We keep an open mind, and we study all your suggestions carefully and beyond ideas shared in this house, we continue to engage widely and hear views from all Singaporeans,” said PM Wong.
“We may not be able to implement every idea. There will be differences of views, and if we can’t implement it for whatever reason, we will explain why,” he said.
PM Wong gives assurance that HDB flats will remain affordable in the longer term
By Tham Yuen-C, The Straits Times, 1 Mar 2025
Housing Board flats will remain affordable in the long run, said Prime Minister Lawrence Wong as he sought to assure Singaporeans that the Government will ensure their basic needs would always remain within reach.
The focus for now is to make sure there are enough new flats for young couples and families buying a home for the first time. Once the overall market has stabilised, the Government will have scope to look at meeting the needs of other groups of flat buyers, PM Wong added.
“Overall, in the longer term, we are confident that HDB prices will remain affordable,” he said on Feb 28 as he rounded up the Budget debate. “Why? Because only Singaporeans can buy HDB flats, and we can, and we will build enough housing for every Singaporean household.”
During the three-day debate, Progress Singapore Party (PSP) Non-Constituency MP (NCMP) Hazel Poa criticised the Government’s policy of selling state land to the HDB at market value and returning the proceeds to the past reserves.
This places a heavy burden on Singaporeans as the land cost is factored into the price of HDB flats, and is an example of the PAP Government’s propensity to prioritise economic considerations over social ones, she said.
Rebutting this characterisation, PM Wong said the Government’s approach is to do things the right way and to get the policies right.
Not pricing land properly would be akin to giving a hidden subsidy that will eventually end up being paid by taxpayers, he said.
“If it’s not paid today, it will have to be paid tomorrow, because at the end of the day, there is no free lunch,” he added.
The first order is to get the price right, then decide how much to subsidise, he said.
HDB does not recover the full cost of flats from buyers, as flats are priced on the basis of affordability, he noted.
PM Wong cited the example of a four-room resale flat in Sengkang that cost around $545,000, nearly $200,000 more than the initial price of about $360,000 five years ago.
In comparison, a four-room Build-To-Order (BTO) flat in the same area launched in October 2024 was sold for about $370,000.
The increase in BTO price has stayed in line with median incomes due to subsidies provided by the Government, he said.
These subsidies, together with the higher cost of construction, are key reasons for the sharp increase in HDB’s deficit, which rose from $2 billion in the 2018 financial year to $6.8 billion in the 2023 financial year, he added.
He acknowledged that it would not be sustainable for the Government to cover this deficit if overall property prices keep rising faster than income growth, and the financing gap increases year after year.
But this will not happen as the Government keeps a close watch on the property market and has introduced cooling measures when necessary, he said, like increasing the additional buyer’s stamp duty.
The significant increase in BTO supply, along with Government Land Sales exercises, has made up for the disruption caused by the Covid-19 pandemic and will eventually stabilise the market, he said.
PM Wong said the “sustained and robust” supply of new flats has helped stabilise the application rate for first-time flat buyers. The rate has come down from 3.7 times in 2019 to 2.1 times in 2024 – below pre-Covid-19 levels.
PSP NCMP Leong Mun Wai asked how the Government would ensure BTO flat prices remain below $1 million amid rising land costs.
Responding, PM Wong said BTO flats must be priced in line with median incomes to keep them affordable.
Mr Leong then asked if BTO flat prices would have exceeded $1 million without the new classification framework that designates flats in the Standard, Plus and Prime categories.
The classification is based on factors such as proximity to the city centre and amenities like MRT stations. Those who buy flats in popular locations are subjected to more stringent rules, such as a 10-year minimum occupation period and having to return subsidies when they sell the flat.
PM Wong declined to delve into hypotheticals.
But he said the classification allows the Government to provide more subsidies for flats in popular areas to keep them affordable, while removing the lottery effect of people benefiting disproportionately when they sell the flats. This is fairer and more equitable, he said.
Mr Leong also raised the spectre of a “collapse” of resale flat prices due to the ramping up of BTO supply in recent years, asking if there are safeguards in place to prevent this.
PM Wong expressed puzzlement at the question, noting that the PSP had previously raised concerns about insufficient flat supply.
“So are we concerned about the high prices, or are we concerned about the opposite?” he said.
He added that the ramping up was necessary as the flat supply had been disrupted during the pandemic, causing an imbalance in the market.
Mr Leong also pressed PM Wong on the Voluntary Early Redevelopment Scheme (Vers), which the Government had proposed to address redevelopment of older HDB flats nearing the end of their 99-year lease.
Replying, PM Wong said more details will be released closer to when the first flats are due for redevelopment under Vers, though he noted it was not any time soon.
Ultimately, flat prices have risen because incomes and standards of living have gone up, benefiting every home owner in Singapore, he said.
“That’s what home ownership provides, a concrete stake in our nation’s progress, and not just that, but eventually a home and a nest egg, which you can tap on for retirement,” he added.
“It’s a sound and a key pillar of our social compact which we will continue to improve and enhance and build upon.”
Government will continue to create good jobs for Singaporeans: PM Wong
By Chin Soo Fang, The Straits Times, 1 Mar 2025
Amid an uncertain global environment, tougher competition and economic realities, the Government will continue to create good jobs and opportunities for Singaporeans.
At the same time, Singapore will press on with industry transformation and keep an eye on its cost competitiveness, said Prime Minister Lawrence Wong in Parliament on Feb 28.
Rounding up the debate on Budget 2025, PM Wong spoke of how Singapore can navigate global challenges even as the entire global system is changing.
He noted that countries are focusing more on defence and security interests with zero-sum competition rather than win-win cooperation. These developments disadvantage small, open economies like Singapore.
The major powers do not want conflict, but are preparing for conflict, he said, noting that 20 years ago, China accounted for just 9 per cent of global manufacturing output, but today it accounts for one-third.
“So naturally, there’s a huge attempt to rebuild manufacturing in America and Europe, and that’s why competition for investments will only intensify,” he said. “That’s why we have to be prepared for tougher competition, and do what we can to stay in the game.”
The National Productivity Fund will be topped up to give Singapore extra firepower to stay competitive and attract investments, he said. Steps are being taken to strengthen infrastructure and enhance Singapore’s enterprise ecosystem and innovation and technology engines. These moves will translate eventually and ultimately into better jobs and better opportunities for all Singaporeans, he added.
Singapore also welcomes and harnesses technology from different countries, but the key sources of technology are now concerned about technology leakage, and they want to keep their proprietary technologies controlled tightly within a safe ecosystem, PM Wong said.
Singapore will take measures to address these concerns so that it remains a reliable and trusted partner in global trade, especially in today’s fragmented world, he said.
As the nation navigates external challenges, it must continue to press on with productivity improvements in its own economy, PM Wong said.
Singapore’s labour productivity has been growing at around 2 per cent a year over the past decade, from 2014 to 2024.
A total of about 50 MPs debated the Budget from Feb 26 to 28.
Several MPs have spoken up on how small and medium-sized enterprises are concerned about the rising costs of business, but there are unavoidable economic realities like rising energy costs, land prices and labour costs, PM Wong said.
Noting that Associate Professor Jamus Lim (Sengkang GRC) had highlighted that wage increases in recent years have lagged behind productivity growth, PM Wong said the data has to be looked at over a longer timeframe, and over the past decade, during which real wage growth has been commensurate with productivity growth.
“And we will continue to push for this, to push for higher productivity as well as higher wages,” he said.
There have been schemes such as the Progressive Wage Model, which ensures continued skills upgrading for workers as they move up the wage ladder, he said.
“We will also keep an eye on costs and provide short-term help to companies where needed, but without blunting the incentive for them to restructure,” he said, citing measures like the corporate income tax rebates.
The Government will also support companies on the regulatory front, such as by reviewing processes and cutting compliance costs.
Noting that some retailers are concerned about the impact of the Johor-Singapore Special Economic Zone and the Johor Bahru-Singapore Rapid Transit System Link, PM Wong said that with e-commerce, competition is already happening, and it is taking place all over the world today.
He urged retailers to adapt and rethink their business models, noting that some have done so successfully with constant innovation and transformation.
The Government will support them with three new initiatives: the SkillsFuture Workforce Development Grant, the refreshed SkillsFuture Enterprise Credit and the Enterprise Compute Initiative. There are other existing enterprise support schemes as well.
If the utilisation of these schemes turns out to be higher than expected and more funding is required, the Ministry of Finance will be happy to provide additional resources, PM Wong said.
With constant industry transformation, Singapore can expect more churn in workplaces, and Singaporeans are understandably anxious about jobs, he said. However, they should not be pinning the blame on foreigners.
Singapore’s approach towards foreign workers is clear, he said.
“We welcome them to work here, but we do this in a controlled manner, and ensure they complement Singaporeans, and we have continued to fine-tune over time our system of controls,” he said.
PM Wong added that the Government has introduced the Compass framework for employment passes and new measures like the Workplace Fairness Act to protect Singaporeans against workplace discrimination. This approach has contributed to positive outcomes, including low overall unemployment rates, good employment outcomes and rising real incomes for Singaporeans.
The Government has also strengthened SkillsFuture through the SkillsFuture Level-Up Programme for mid-career workers and the SkillsFuture Jobseeker Support scheme for the involuntarily unemployed.
PM Wong said he expects to put in additional resources in the coming years to further strengthen SkillsFuture as there is still much more to be done.
“We cannot save every job, but we will support every worker in Singapore,” he said. “We will create even more opportunities and better jobs for all Singaporeans.”
4 things to take away from the last day of the Budget debate
By Tay Hong Yi, The Straits Times, 1 Mar 2025
Prime Minister Lawrence Wong set in context Budget 2025’s place among recent past Budgets and future needs in an hour-long speech to round up the 2½-day Budget debate on Feb 28.
Here is what he said in his speech and subsequent exchanges with MPs:
Supporting workers and firms in stiffening competition
Singapore needs to be prepared for tougher competition and do what it can to stay in the game despite the changing global system, PM Wong said.
He noted that countries are turning towards zero-sum competition rather than win-win cooperation, disadvantaging small, open economies like Singapore.
Acknowledging that several MPs had raised concerns over the high cost of doing business, PM Wong said the Government will keep an eye on cost competitiveness.
He also urged retailers in particular to adapt and rethink their business models, giving the example of baking supplies firm Phoon Huat, which grew its manufacturing and distribution capabilities, and adopted e-commerce, which lets it sell to customers internationally.
But Singapore cannot compete on cost alone to attract multinational firms, which have options, to set up shop here, PM Wong said in a subsequent exchange with Nominated MP Neil Parekh.
“We have to improve our capabilities, offer a value proposition to them, and that’s why we are investing in R&D (research and development),” he said.
The Government is also building up the capability of Singaporean workers and local businesses, in order to supply multinationals with the talent and products they need to keep long-term investments here.
In response to MPs who had raised concerns about livelihoods being disrupted by technological advances, PM Wong said these investments in local capabilities are part of the solution.
He assured Singaporeans that they will get support to adapt to economic changes, with more money to be devoted to training and workforce policies in the coming years, including under the SkillsFuture umbrella.
In another exchange, Non-Constituency MP Hazel Poa of the Progress Singapore Party (PSP) asked if more investment options could be made available for workers’ Central Provident Fund (CPF) savings, with differentiated rules based on age, so older workers can make only lower-risk investments.
On this, PM Wong said there are life-cycle funds available on the market with portfolios that adjust based on investors’ age, but these tend to not be very popular among Singaporeans. “(We) hope that we can make them more accessible to Singaporeans.”
He added that the Government is studying whether the CPF system can be redesigned or updated, but cautioned that even life-cycle funds may not consistently achieve better returns than current CPF rates of up to 6 per cent.
Keeping housing prices in check
Resale prices for Housing Board flats have gone up in the short term, but the Government is confident that flat prices will remain affordable in the longer term, PM Wong said.
“Why? Because only Singaporeans can buy HDB flats, and we can – and we will – build enough housing for every Singaporean household,” he added.
PM Wong pushed back against a call by PSP’s Ms Poa to exclude land costs from the pricing of new flats, saying this would detract from the proper pricing of resources.
“It’s simply about getting our policies right and doing things the right way. If we don’t price properly, then we are giving a hidden subsidy,” he said, adding that this subsidy would have to be borne by consumers or taxpayers at some point.
Instead, the HDB pays the market price for the land cost of developing a new flat, but does not turn a profit for that flat, which is priced with affordability in mind, he said.
He gave the example of how a four-room Build-To-Order (BTO) flat in Sengkang in the October 2024 launch exercise was priced at around $370,000. In comparison, a resale flat nearby sells for around $545,000, even though it was priced at around $360,000 five years before.
“So resale prices have gone up a lot. BTO, yes, but not as much, and in line with median incomes,” PM Wong said. “The difference is a subsidy that’s borne by the Government that, together with the higher cost of construction, is one of the key reasons why HDB’s deficit has increased sharply.”
HDB’s deficit was $2 billion in the 2018 financial year, but $6.8 billion in the 2023 financial year, with the Government funding this higher deficit.
Covering this deficit will not be sustainable if overall property prices keep rising faster than incomes and the financing gap keeps growing year after year, he said.
However, cooling measures such as increases to additional buyer’s stamp duty for foreigners and those owning multiple properties, plus increased BTO flat supply, will help stabilise the market and ensure the deficit remains sustainable, he said.
“Overall, in the longer term, we are confident that HDB prices will remain affordable,” PM Wong said.
PSP Non-Constituency MP Leong Mun Wai then asked if the Government had a solution for HDB lease decay, where a flat’s value erodes towards the end of its 99-year lease, to which PM Wong said the Government’s solution is the Voluntary Early Redevelopment Scheme.
GST hike happened at the right time
The two-step goods and services (GST) hike in 2023 and 2024 did not “turbocharge” inflation, PM Wong said in response to earlier comments from Mr Leong and Leader of the Opposition Pritam Singh.
Citing the continued decline in inflation from 2022 to 2024, he noted that the Monetary Authority of Singapore (MAS) had correctly assessed the impact of the hike to be transitory.
But the Prime Minister acknowledged that people are still concerned about cost pressures even though inflation has eased.
“It’s not unique to us. It’s felt across many other advanced economies where the headline economic indicators are positive but sentiments are poor,” he said, adding that people are still adjusting to new price levels stemming from past inflation.
PM Wong reiterated that the Government will provide temporary cost-of-living support for as long as it is needed and within means – for instance, through CDC vouchers.
The cost-of-living measures and the SG60 package form about 5 per cent of the Budget. But he said a much larger part of spending is in structural programmes, especially those focused on education and skills and job training.
PM Wong also said inflation in Singapore in recent years was driven mainly by global factors, which had begun pushing prices up before the GST hikes.
In response, Mr Singh said the “turbocharging” effect was seen in how the GST hike contributed to core inflation.
He noted that the MAS had projected core inflation for 2024 to come in at 2.5 per cent to 3.5 per cent, with the GST increase contributing slightly less than 1 percentage point to those figures. This would mean the tax hike could have contributed as much as 40 per cent to core inflation, he said.
PM Wong disagreed. He said Mr Singh’s view would suggest that GST should be raised at a time of very high inflation, so that the proportionate impact of the change on inflation would be smaller.
What a bumper surplus means
If not for the GST increase and unexpectedly large corporate income tax collections, Singapore would have run a Budget deficit in both the 2024 and 2025 financial years, PM Wong said.
It would have found itself in a much weaker position, with less money available to spend on essential services, support for the needy and investments for the future, he added. He noted that the Government had also rolled out the Assurance Package to cushion the impact of the GST increase, and enhanced the permanent GST voucher scheme for lower-income Singaporeans.
Responding to a question from Mr Liang Eng Hwa (Bukit Panjang), PM Wong also said that more than $40 billion is expected to be spent on social development by 2030, including moves tied to the Forward Singapore exercise.
Meanwhile, Mr Singh asked if the Government would update its medium-term fiscal outlook to include corporate income tax revenues that would accrue due to the Base Erosion and Profit Shifting (BEPS) 2.0 initiative. This global scheme is aimed at tackling tax avoidance by multinational enterprises.
PM Wong noted that under BEPS, a minimum corporate tax of 15 per cent across all countries has emerged. But competition between countries to draw investors via other incentives remains, he said.
“So even if the domestic top-up tax yields more revenue, we are very likely to have to also spend more to maintain our competitiveness,” he added.
Opposition MPs had, over the past two days of the Budget debate, also questioned the Government’s fiscal marksmanship because of the larger-than-expected surplus.
In reply, PM Wong said: “We have to make assumptions, and we have to decide how we deal with uncertainties. In a crisis when there is greater volatility in the economy, it is inherently more difficult to predict the turning points.”
In most other countries, poor budget marksmanship is when a government severely overestimates the revenue it will collect and underestimates its expenditure, he said.
PM Wong said this is not the case in Singapore, where surpluses are never squandered. Instead, they fund future needs and support Singaporeans, with the fruits of progress shared with everyone.
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