So 2010 inflation was at 2.8%, and this year the government estimates it to be at 4%.
I’m actually wondering how these figures came about. (JJ, I know you’re reading this. Please enlighten – you can leave a private comment if you want.)
Are property prices part of the index used to calculate inflation in Singapore? How about vehicle prices? How about the fact that CPF has raised it’s maximum monthly cap to $5,000 and increased employer contribution by 0.5%?
My estimate is that inflation has in fact risen a good 5%-8% in 2010 and will be much higher in 2011.
If you compare Singapore and maybe New Zealand which has similar inflation rates, the interest rates in Singapore are at a pathetic 0.06%. The interest rates in countries like Australia and New Zealand are at 3-4% – at least close to that of inflation. Even USA with an inflation rate of 1.6% in 2010 has an interest rate of 0.25% – four times that of Singapore.
What this means is that money my bank is shrinking 3.94% every year. Forget it, make that 4%.
So on top of putting up in an overcrowded nation and dealing with my noisy neighbours, my savings are actually shrinking. For every $10,000, that’s $400. Wow.
If I don’t want risks and want my money to grow or at least catch up with inflation, what do I do with it?
References:
http://www.rttnews.com/Content/AsianEconomicNews.aspx?Node=B2&Id=1571224
http://www.tradingeconomics.com/Economics/Stock-Market.aspx?Symbol=SGY
http://www.tradingeconomics.com/Economics/Stock-Market.aspx?Symbol=NZD
March 16, 2011 at 3:00 am
Anyway to answer some of your qns directly:
Property and car prices are part of the index for calculating inflation. In fact a significant part of the increase in CPI came (and will be coming) from cars and accomodation.
CPF is not included in CPI. It is savings (and earnings) and not a cost 🙂
Most people will have the view that inflation seems much higher than the headline number – and can often bring up specifc anecdotes (eg a cup of kopi raise by 10-20 cents which is more than the CPI rise). But then people tend to be biased, only focusing on the cases where prices have risen (after all that’s where we feel the most pain) and forget that many other goods that they buy may not have seen price increase (or even decrease) at all. Maybe if you track most goods that you buy rigourously you might get a lower number.
I agree that interest rates have not been enough to cover inflation. This probably means that putting money in the bank is not a good idea… Must put longer term savings into other investment vehicles.
March 15, 2011 at 1:11 am
For the breakdown of the components of the CPI and some reasons behind the trends, perhaps this (see page 19) may help:
http://app.mti.gov.sg/data/article/24221/doc/FinalReport_AES_2010.pdf
As for the S$ interest rate being lower than inflation, there are a few drivers imo:
1. MAS’s policy of strong S$ exchange rate – Because S$ appreciation is strong, the interest rate would have to be relatively low, or else it would be an extremely good deal for non-sg currency investors.
2. There is not much demand for S$ funds in singapore for investment, we are already a very developed economy.
March 9, 2011 at 6:15 pm
lower interest = lower loan rates = stimulate economy…..
the concept is not to sit our money in bank, government wont like this concept, but by using our money on other things will stimulate the economy…. so…. put ur money oversea! hahahah.