Singapore should avoid further GST hike, as high costs hurt competitiveness: Louis Chua
Elysia Tan
WARNING that high costs may hurt Singapore’s competitiveness, Workers’ Party (WP) Member of Parliament Louis Chua urged the government to “avoid introducing more pressure into the system through an untimely GST (goods and services tax) hike”.
This January’s GST hike has already driven up inflation, with the next hike due in January 2024, he said on Wednesday (Apr 19) during the third day of debate on the President’s Address.
He argued that a high cost of living – real or perceived – hurts Singapore’s attractiveness as a liveable city, weakens confidence, and makes the country less competitive.
Citing a business sentiment survey by the Singaporean-German Chamber of Industry and Commerce, Chua noted that “almost half of German employers in Singapore polled, or 44 per cent, said ‘psychological distress and lower work performance is visible among staff’ due to the unpredictable housing situation”.
Core consumer prices rose 5.5 per cent year on year in February, with food prices up more than 8 per cent, he noted. While inflation is projected to slow more discernably in the second half of 2023, it will remain elevated compared to recent years.
Noting that wage growth for full-time workers barely outpaced inflation last year, Chua hoped the government could avoid introducing more inflationary pressure with a GST hike, “especially if wage growth remains uneven, or weak”.
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Labour market conditions could also worsen as the risk of a recession rises, said Chua, highlighting the “vexing” problem of job security as Singapore has neither a “nationally defined social-protection floor” nor a law mandating retrenchment benefits.
Welcoming the government’s plans to extend redundancy support schemes beyond the pandemic, he called for such legislation to be put in place as soon as possible, before the next recession hits.
Chua also raised concerns on housing affordability, with housing and rental prices continuing to climb as supply remains lacking.
“I still hope that the government will consider intervening in the market sooner than later, rather than continue monitoring the market, in order to preserve open market rental affordability,” he said.
Rising costs were similarly flagged by People’s Action Party MP Sharael Taha (Pasir Ris-Punggol GRC), who noted that Singapore’s high labour costs and global high inflation have increased the costs of doing business.
Other business cost pressures include impending carbon tax increases and global tax changes, he added.
Instead of being concerned about a labour market slowdown, however, Sharael said that the tight labour market has made it hard for companies to attract and retain talent.
In the face of these challenges, he said, Singapore must reposition and find new opportunities to stay competitive, while businesses must transform and improve productivity, instead of depressing wages.
He noted “encouraging” moves such as the expansion of the Progressive Wage Model into more industries and the S$4 billion top-up of the National Productivity Fund, announced in Budget 2023. But he asked: “How do we ensure the funds are effectively used to drive productivity improvements that will help lower the cost of doing business?”
He added that Singapore’s focus should be on equipping workers with the skills required in the evolving economy, rather than protecting jobs that are no longer relevant.
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