PAP showing a lack of faith in the Singaporean consumer to spend prudently

One of the most interesting themes in the recent budget was how the PAP Government has been creating new rules to limit consumer spending on big ticket items.

Budget 2013 saw 2 new measures to limit spending. Firstly for cars, there is a cap on car loans and an increase in ARF for expensive cars. Depending on the price of your new car, a buyer can find himself forced to pay about half of this cost with cold hard cash. Some people believe this measure is meant to reduce COE prices. But I believe the greater reason is because the PAP believes too many Singaporeans are over-spending on cars and thus have less money for housing and families. We are still living in the shadow of the 5 “C”s Singapore Dream. There are still too many people expect that they need a car to have a family. While I support this new rule on car loans, I believe that many people will be unhappy that the PAP has just made their dream of owning a car even more difficult.

The second measure is on the raising of CPF contributions for older workers, as well as a change for low income workers. The PAP is clearly worried that Singapore residents in these 2 bands aren’t saving enough for their retirement. I’m not surprised to see this change because the sad fact is that retirement is getting ever more expensive with rising inflation.

It is debatable if Singapore’s inflation is a matter that is within our government’s control. Massive liquidity from global quantitative easing exercises means the world is flooded with too much cash, which has in turn raised the prices of global commodities like food, oil and other imports. Singapore’s small size also means that car ownership will naturally be limited, and homes in good locations will continue to command a high premium as long as we have millions of people believing that investing in homes makes the best returns. Hopefully the new changes to property tax will convince people that investing in property for rental yields is not always the best option.

These 2 measures, along with the earlier announced property cooling measure that limits the size of home loans according to the buyer’s income, show that the state is increasingly taking an interventionist stance in managing spending on the big ticket items of housing, cars and retirement. This is a major change in the PAP’s mindset, because the PAP had traditionally advoacated a political philosophy of personal responsibility. Citizens were expected to work hard, spend prudently, and save up a nest’s egg to take care of their parents and children.  But now it appears the MIW have decided that Singaporeans cannot be trusted to spend money prudently.

Sadly, I believe that some of these new rules are justified. Singaporeans are not exactly a poor lot. Not when we command one of the highest smartphone ownership rates in the world. Our ability to splurge on gadgets signifies that Singaporeans are vulnerable to consumerism mindsets. There are too many youngsters today who are complaining that they have no money to start a family, but are instead spending most of their money on gadgets, holidays and cars. So maybe the PAP is doing the right thing with these new rules, especially when income levels are expected to rise with the Wage Credit Scheme.


About sgthinker

I'm a 40-year old Singaporean male, and this blog pens down my thoughts and feelings about Singapore's political happenings, government policies and society trends. I hope this blog will provide a moderate voice in the growing online debate about the state of Singapore's society. Some of the posts here won't be solely written by me, since there will be times when other writers are more eloquent at expressing their views, in which case I'll share their insights (along with my comments). The content on this blog is owned by me.If you wish to share or reproduce the content, please attribute it to this blog.
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14 Responses to PAP showing a lack of faith in the Singaporean consumer to spend prudently

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  10. Ash says:

    I am an 18 year old Singaporean young adult. I pay my own school fees and refrain from splurging on unnecessary things, with an exception being the occasional nice meal. Which comes, at most, only once a month and never costs more than $20 dollars. That is why what you wrote hits close to home. I genuinely worry about myself and my parents now. When I step into society drawing a starting pay of $1800, spending my months slavishly working and saving. At what age can I afford a house for my family?

    It is all well and good to put a limit on spending and commercial exploitation (eg. People who misuse the property system.) But at what cost?

    • Tan says:

      Well Ash, you probably don’t understand the new changes then. It doesn’t affect first time property buyers, and even more so helps YOU in getting your first property easier.

      Again, if you earn $1000/month, live a $1000 lifestyle. If you make $10,000 live a $10,000 lifestyle.

  11. Anthony Sim says:

    I have read quite a number of articles with regard to the quality of life and the effect of over- population in a small island which are real concerns for Singaporeans.

    Whatever measures the government is taking now may certainly be too little too late. I personally cannot see a population explosion of 6.9 million toward 2030. The situation from what I read appears to be very unbearable at the moment with a current pop of 5.3 mil? Maybe the government should let the population grow naturally at its own pace and concentrate on giving the the security to its people. By creating a population growth artificially may result in an irrevocable measure of corrective actions.

    Simple supply and demand theory will point out to anyone the shortage of housing (as it is happening now) and majority of the “Singaporean dream” of owning a home will eventually will something of a dream only. Of course prices will escalate exponentially beyond the attainability of the Singaporeans as if government does not know already.

    Singapore is unique. It is small. It has its limitation. Can the government address this and assure the people that the decisions they make are of the interests of Singaporeans and the country?

  12. Cath says:

    All this measures is jus making Singaporean life harder and harder

  13. Pingback: Daily SG: 26 Feb 2013 | The Singapore Daily

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