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Thread: Budget measures carry inflation, risks

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    Default Budget measures carry inflation, risks

    Business Times - 20 Feb 2012


    Budget measures carry inflation, risks

    Higher wages may drive up prices; companies may not be able to find local staff

    By CONRAD TAN

    (SINGAPORE) THE Budget measures to spur increased productivity and sustainable long-term growth for Singapore carry short-term inflation and other risks for businesses and the economy, say analysts and business leaders.

    In particular, some businesses are likely to face difficulties finding local replacements for mid-skilled foreign workers in time to meet the Government's deadline.

    The focus on boosting wages for lower-income Singaporeans and using more local workers is also likely to drive up prices for goods and services as businesses pass on cost increases to consumers, economists said.

    'Frankly, I think inflation is going to stay elevated for the next one to two years, at least,' OCBC economist Selena Ling said. 'Economic restructuring, income growth, using domestic rather than foreign labour - you can imagine what will happen, even to the prices in food courts.

    'If foreign cleaners aren't there and locals do the job, the pay will go up, and the cost of your plate of chicken rice is going to go up. Same thing for your hairdressers, nurses, and other service staff. It's inevitable, but I'm not sure everyone realises that.

    'In the end, whether your income growth outstrips inflation or inflation outstrips your income growth will be the key determinant of whether your real wealth goes up or down.'

    Barclays Capital economist Leong Wai Ho agreed. 'Core inflation will not recede this year, even if growth slows. We think the cost adjustment will persist over the next two years. Services such as retail, restaurants, healthcare, education and recreation will see the most significant cost pass-through to prices,' he said.

    Citigroup economist Kit Wei Zheng warned of other risks. 'Inflation aside, if the productivity drive fails over the longer term, a loss of competitiveness and relocation and job losses could result.'

    Meanwhile, businesses are fretting over new rules that will further restrict the hiring of foreign workers from July 1, measures that are likely to hit smaller firms the hardest.

    The new limit on hiring mid-skilled foreigners on the S Pass permit is 'my biggest concern', said Moh Chong Tau, deputy president of the Singapore Manufacturers' Federation.

    'They're basically PMETs (professionals, managers, executives and technicians) - they're not easily replaceable,' said Dr Moh, who is also president and chief executive of precision engineering company Makino Asia.

    The workers required for some of the specialised jobs now done by S Pass holders - such as manufacturing supervisors or skilled machinists - 'are not readily available among the local people', he said. 'You need the skills plus the knowledge to manage the operations as middle management.'

    From July 1, manufacturing companies will be allowed to fill at most 60 per cent of their workforce with foreigners, down from the current 65 per cent. For services firms, that dependency ratio ceiling will be cut to 45 per cent, from 50 per cent now. And for all sectors, the maximum proportion of S Pass holders in a firm's staff will be cut to 20 per cent, from 25 per cent now.

    Companies that already exceed the new limits when they take effect on July 1 will be given until June 2014 to comply with the new rules.

    But some firms will feel the impact much sooner. Companies that now have a quarter of their staff comprising S Pass holders won't be able to hire new S Pass holders to replace those who leave from July 1, Dr Moh said. 'It will be a big problem.'

    Measures to attract older workers and homemakers into the workforce 'look promising' to address the labour shortage in the medium to long term, said Phillip Overmyer, chief executive of the Singapore International Chamber of Commerce. 'But in the short run, companies may be disadvantaged as certain jobs and industries remain unattractive to local workers. There is no certainty that companies' efforts in redesigning and enhancing recognition for these jobs will help to attract and retain Singaporeans.'

    Finally, there is the less obvious, but real risk of driving away even skilled foreign labour, PwC Services warned.

    'While the fine print makes it clear that the reductions are for work permit and S Pass holders, the broad reference to 'foreign workers' could send a mixed signal to the foreign talent and multi-national companies that Singapore is seeking to attract. They may perceive from the headlines that they are no longer welcome in Singapore, and may look elsewhere.'

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    Inflation will be here to stay for a while. Worrying trend.. so what dole out more cash? Inflation eats it away.

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    During times of inflation, consume less. Use less, eat less, buy less... Renew, reuse and refuse. Very often, less is more.

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    Inflation too high ... no money for food because all in properties? Mc Donald extra value meal is now 25% cheaper all day long
    Ride at your own risk !!!

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    Quote Originally Posted by phantom_opera
    Inflation too high ... no money for food because all in properties? Mc Donald extra value meal is now 25% cheaper all day long
    is the portion smaller?

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    Quote Originally Posted by phantom_opera
    Inflation too high ... no money for food because all in properties? Mc Donald extra value meal is now 25% cheaper all day long
    may be you kena con-ed liow... new low quantum MM meal... cheaper to pay but no meat inside burger...bread/bun also smaller...




    btw:
    inflation ??... umm... let me think of what's that big problem to me...
    oops!!... me like inflation leh... yeah!!... bcoz me owe banks >S$1mil....

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    Quote Originally Posted by ikan bilis
    inflation ??... umm... let me think of what's that big problem to me...
    oops!!... me like inflation leh... yeah!!... bcoz me owe banks >S$1mil....
    errr... I'm assuming that your income is increasing faster than the inflation rate then? If not, how to be really happy?

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    Quote Originally Posted by 5577
    errr... I'm assuming that your income is increasing faster than the inflation rate then? If not, how to be really happy?
    he is assuming property value will increase with inflation?

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    Quote Originally Posted by Rosy
    he is assuming property value will increase with inflation?
    hmmm... a possibility. And must also assume that the property can be sold easily for the $$$ to be realised.

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    Quote Originally Posted by 5577
    errr... I'm assuming that your income is increasing faster than the inflation rate then? If not, how to be really happy?
    loan interest rate 1-2%.... inflation 5%... real-estate appreciation 10% though slowing down... rental income another 3-4%...



    hello... can't you feel the pain of some guy kaykiang sold hdb and camping at changi beach now...
    - house rental too high liow,... got to camp at changi now...
    - little last amount of $$ inside bank keep shrinking...
    - real estate price keeps cheong up... no longer can afford to buy back hdb liow...
    - McDonalds value meal also keeps shrinking to MM size...
    - last night run out of tiger balm oil and kept scratching mosquito bites for whole night...
    - posting pains onto forums also nobody cares....

    must be in great pain, frustration and angry until everything turns red liow...


    so, you tell me inflation scary or not!!...
    wanna be die die must "hedge" it or not ??... hello! me tiny fish another victim of this new world hor...

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    yeah!

    Inflation! I like....

    Rental go up!!!

    Property Price go up!!!

    Bank Loan (inflation adjusted) go down!!!!

    Huat ah!

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    Quote Originally Posted by sh
    yeah!

    Inflation! I like....

    Rental go up!!!

    Property Price go up!!!

    Bank Loan (inflation adjusted) go down!!!!

    Huat ah!
    Mr B..... are you reading this post? lol.......

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    Quote Originally Posted by sh
    yeah!

    Inflation! I like....

    Rental go up!!!

    Property Price go up!!!

    Bank Loan (inflation adjusted) go down!!!!

    Huat ah!
    inflation paid for your property.

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    Labour cost is definitely going up due to scarcity of labour, even China is experiencing this problem. Material costs will also go up because there are too many construction projects competing for resources like cranes. The government has committed to too many infrastructure projects like MRT and won't reduce land price. All these factors point to inherent higher costs for the future condos. I think buying good FH and 999LH properties to hold like what the Indonesians always do here is the way to go. For those who can't do that, buying gold is the next option. Of course the best option is to invest in yourself and earn more $.

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    be careful dun overleverage hor

    now interest rate low low which makes mthly installment low low also.....banks got cash surplus and 'anyhow' approve loans hor....back in 2006/2007, not so easy to get loan one lor....

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    Quote Originally Posted by hyenergix
    Labour cost is definitely going up due to scarcity of labour, even China is experiencing this problem. Material costs will also go up because there are too many construction projects competing for resources like cranes. The government has committed to too many infrastructure projects like MRT and won't reduce land price. All these factors point to inherent higher costs for the future condos. I think buying good FH and 999LH properties to hold like what the Indonesians always do here is the way to go. For those who can't do that, buying gold is the next option. Of course the best option is to invest in yourself and earn more $.
    If costs go up, then all prices up including 99LH. Your FH and 999LH again hehe...Why limit your choices? I keep an open mind. Not all 99LH are junk. Money can be made from them too, sometimes more than FH and 999LH.

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    Quote Originally Posted by fclim
    Your FH and 999LH again hehe...Why limit your choices? I keep an open mind. Not all 99LH are junk. Money can be made from them too, sometimes more than FH and 999LH.
    fh/999 meant to keep long term mah

    99lh more for flip flip one lor

    gg forward still can flip flip anot.....no rite? LOL

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    Quote Originally Posted by fclim
    If costs go up, then all prices up including 99LH. Your FH and 999LH again hehe...Why limit your choices? I keep an open mind. Not all 99LH are junk. Money can be made from them too, sometimes more than FH and 999LH.
    I always believe value goes up when supply comes down. I'm just old fashioned maybe. I don't mind getting a 99LH if location is good, but I will treat it as a consumption item.

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    Quote Originally Posted by devilplate
    fh/999 meant to keep long term mah

    99lh more for flip flip one lor

    gg forward still can flip flip anot.....no rite? LOL
    Many 99LH oso appreciate today wat compared to their price 10, 20 years ago. So, hard to tell rite?

    Cannot say flip flip.

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