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.