04 April 2011

Whose Responsibility is it to Fight Inflation?

NTUC FairPrice has promised that prices of its 500 housebrand items will remain the same for six months.  In addition, Cold Storage, Giant and Shop and Save have made similar commitments.  These will help lessen the impact of inflation.

Stallholders at food centres and coffee shops were also urged to commit not to raise prices.

But if the cost of their supplies and other inputs including but not limited to wages and utilities increase in the meantime, their profit margins will be squeezed.

Why should the shareholders of the supermarket chains and other businesses or sole proprietors be the ones to bear the burden of keeping inflation in check for their customers, when they are merely trying to pass on the higher cost of their inputs?

In a more delicate predicament are food vendors operating at the local universities and polytechnics.  According to media reports, most of the canteens there are managed by committees comprising staff and students, which have the power to decide whether or not to allow price increases.  Furthermore, the vendors are afraid of being blacklisted by the administration in the future.

Singapore Polytechnic approved a request by a stall holder selling chicken/duck rice because the latter had been selling way below market prices for a long time and his proposed price was still below the norm.  It tries to ensure that food prices are affordable to its students while protecting the business interests of its stall holders.

Republic Polytechnic rejected a request by a stall holder selling drinks and snacks to raise the price of his buns because it wanted to maintain low prices for its students.  It said that student welfare was of prime importance to it and it would to its best to avoid unreasonable or untimely price increases.

Why don't the universities and the polytechnics consider reducing the rental they charge the stall holders?

Similarly, shouldn't the Government shoulder at least some of the burden of inflation affecting its citizens as a whole, especially when it has the capacity to do so, in light of the budget surpluses?

What can the Government do?

It should lower or scrap GST on consumer necessities.  Lowering or scrapping GST on consumer necessities will not only mitigate the effects of rising inflation but also reduce the cost of living.

It can freeze rentals.

It can freeze property tax on all properties, especially residential and small commercial properties.

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Notes

1. Food prices at varsities, polys holding steady The Straits Times (26 Mar 2011).

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