Inflation of Singapore

Bachelor of Commerce (Bridging) Intake 17 Elements of Economics Contents Introduction3 CPI inflation4 MAS inflation5 snobbish pass beguile5 trying on6 Recomm leftoveration7 Conclusion8 References9 lump here up 5. 5% in celestial latitude Introduction Last December, capital of capital of capital of capital of capital of Singapores inflation, which is defined as a persistently rising price level, rose to 5. 5 per centime on a year-on-year basis. The author states that CPI inflation is due to the adjustment and private road enthrall high uper(prenominal) contribution. Furthermore, the author also mention the MAS core inflation increase to 2. per cent year-on-year due to the current pass-through of earlier increasing costs. The report from Decembers MASs Recent Economic Developments in Singapore further supports the authors article. In this discussion, it could be argued that consumer pauperism for ho utilise and transport argon the major(ip) factors, which segment of Statist ic Singapore reported, contribute to the increment in inflation. In addressing the challenge of the governings to meet the consumer demand, the paper go forth mention a few discussions and a recommendation about the issue on inflation of Singapore.CPI and MAS Inflation CPI inflation CPI, or Consumer Price Index, measures the average of the prices paid by urban consumers for a mend basket of consumer goods and service (Michael Parkin, 2011). In Singapore, the major contributing fixed baskets are Housing, Food and Transport. In total, these tercet factors are more than half of the entire CPI. Data extracted from the December 2011s CPI report is using year 2009 as the base period, which is derived from a Household Expenditure Survey.As Singapore inflation rates are published monthly, the Singapore Government is preventing bad or fictional speculations of future inflation. pic Source Department of Statistic Singapore, 2012 downstairs table showing partial data of Singapore CPI Dece mber 2011 FOOD 2,205 HOUSING 2,548 Accommodation 2,002 Fuel & utilities 357 Household durables 189 TRANSPORT 1,553 secluded road transport 1,166 Public road transport 366 Other travel & transport 21 Source Department of Statistic Singapore, 2012 MAS inflation MAS core inflation is utter as a smaller amount than the CPI inflation in this article. This difference is due to MAS monitor a core inflation measure that excludes components of Accommodation and mysterious road transport. Private road transport Data from Department of Statistic Singapore states that the overall inflation of transport increased 10% from weather years December with a detailed 12. 2% increment for the sub category Private road transport. Singapore Government controls the recite of vehicles on the island via placing a quota on COE.In mid October 2011, the Singapore Government announced that the annual growth rate will be decreased smoothly until end of 2014 as vehicles population is growing faster t han the governments vehicle growth rate (Tony Ng, 2011). With the astute increase in COE premiums in June and July 2011 (MAS, 2012), car prices surged, therefore defining the 12. 2% increment in Private road transport. As COE supply is tight, private road transport costs will stop firm. Hence, contribution to the increased inflation is not entirely from private road transport, but from the other main(prenominal) fixed basket, Accommodation.Accommodation Singapores economy recovered fast unexpectedly, this is good news but with bounce as Singapores infrastructure programmes could not keep pace, do deficit in the lodging program (Prime Minister Lee Hsien Loong, 2011). Since property cooling measures were introduced by the government in year 2010, properties firms claimed that the number of deals closed rich person dropped by 30% compared to a year ago ( airscrewWire, 2011). One of the new measures is that legal residence owners being required to sell off their flats first befo re qualifying to the higher bank impart of 80% of next purchasing flats value.Most sellers prefer buy first, then sell (Eugene Lim, 2011), causing them to disqualify from the higher loan and only facing with the maximum 60% loan from the banks. Now they have to spring up 40% of purchasing flat value from their own cash. With such conditions, sellers are commanding higher cash premiums or cash over valuation (COV) resulting in more expensive or increase resale flats. On the other hand, people who turn away from resale flats, with factor from the supplies of new flats that are s scurvy in completion, are looking into rental accommodation.The other new cooling measurement the government has introduced is the Minimum craft Period (MOP). It is defined that flats washstand be only being rented out after five years, increased from the previous one to three years period. As more Singaporeans and other people in Singapore are looking for completed dwellings, the inflation in accommodati on is caused by high demand and low supply. Recommendation pic Supply and Demand Graph Source genus Irena Asmundson, 2010. Demand and supply curves are charted as shown above.As prices rises, suppliers are willing to produce more and consumers buying less (Irena Asmendson, 2010). In addition, the demand for accommodation is high and the supply is low, Singapore accommodations price has inflated. To solve this increasing demand and shortage of accommodation, Singapore government has been producing more HDB apartments. From the key statistic from the Housing and Development Board, there are 43,030 apartments under construction in the fiscal year of 2010/2011, a 20. 8% increased from the previous fiscal year.A huge increase of 68. 6% apartments completed from the previous year further reinstate the governments effort to lower the shortage of accommodation, but the total bookings for new flats are 17,419, less than half the number of apartments under construction. This difference can be defined as a huge number of unsold or surplus apartments as HDB in the market. If this is to be true, the huge number of unsold apartment will lower the prices, causing suppliers to produce less and consumers buying more. ConclusionSingapore CPI inflation rate in December is hugely contributed from the factor of accommodation and private road transport. In conclusion, the increased COE premiums and accommodation shortage can the detailed explanation. The Singapore government has been doing readjustment in the property market and private road transport. With introduction of new cooling measures and expression of more new apartments, the government can curb or lowered the accommodation inflation rate. inclusion with the huge surplus of unsold apartment, the accommodation inflation rate can be lowered to with the demand and supply law.Word count 932 References Michael Parkin, 2009. Economics. 10th edition. Pearson Addison Wesley Department of Statistic Singapore (2012, January 25). Singapore Consumer Price Index December 2011. Department of Statistic Singapore. Retrieved from http//www. singstat. gov. sg/news/news/cpidec2011. pdf Accessed 6 February 2012 Matthew Bishop (2004, April). Economics A-Z. The Economist. Retrieved from http//www. economist. com/economics-a-to-z/inode-21529397 Accessed 6 February 2012 Monetary Authority of Singapore (2011, December 8).Recent Economic Developments in Singapore. Monetary Authority of Singapore. Retrieved from http//www. mas. gov. sg/resource/eco_research/eco_dev_ana/Recent_Economic_Developments. pdf Accessed 7 February 2012 Tony Ng (2011, October 19). COE premiums hit record hit. AsiaOne travel. Retrieved from http//www. asiaone. com/Motoring/News/Story/A1Story20111019-305931. html Accessed 8 February 2012 Prime Minister Lee Hsien Loong (2011, August 14). National daytime Rally 2011. Prime Ministers Office, Singapore. Retrieved from http//www. pmo. gov. g/content/pmosite/mediacentre/speechesninterviews/primeminister/20 11/August/Prime_Minister_Lee_Hsien_Loongs_National_Day_Rally_2011_Speech_in_English. html Accessed 8 February 2012 Property Wire (2011, October 10). PropertyWire, Asia. Shortage or resale flats driving up prices in Singapore. Retrieved from http//www. propertywire. com/news/asia/singapore-real-estate-shortage-201110105661. html Accessed 8 February 2012 Irena Asmundson (2010, June). Finance and Development. Back to Basic Supply and Demand. Retieved from http//www. imf. org/external/pubs/ft/fandd/2010/06/basics. htm Accessed 9