RISING food prices recently may have worried many, but the Government has stepped in to assure Singaporeans that this phenomenon will tail off in the second half of 2008.
Speaking in Parliament on Monday, Minister for Trade and Industry Lim Hng Kiang told the House that prices of food items like diary products, vegetables and cereals have gone up due to the 'dearer imports from Australia and Malaysia'.
Mr Lim explained that the increase in inflation is fuelled by rising food prices and energy costs, as well as the increase in Goods and Services Tax (GST).
But he added that the GST effect will wear off by the second half of 2008.
In addition, transport costs will drop and oil prices will wash out next year.
Mr Lim stressed that Gross Domestic Product (GDP) has grown on average by more than six per cent since 2003.
He said growth has been broad-based across all sectors, wages have also been growing especially last year and this year. So against this backdrop, Singaporeans should not be surprised that inflation rises above the unusually low this year.
That also means we should be wary in interpreting the rise in the Consumer Price Index (CPI) as that of an increase in the cost of living.
Mr Lim said that the CPI measures average changes in prices across all households but that the cost of living of that particular household is dependent on its spending pattern.
He went on to add that a rise in CPI can reflect a rise in technical factors rather than a rise in prices faced by consumers.
In response to Jalan Besar GRC Member of Parliament Dr Lily Neo's questions on strengthening the Singapore dollar and the components of CPI calculation, he said food accounts for 23 per cent of the CPI calculation, while transport accounts for about 21 to 22 per cent.
Mr Lim added that the Government measures the CPI affecting the different income groups to keep tabs on the impact of inflation.
Nominated Member of Parliament Sylvia Lim also asked if the Government is looking at further diversifying food sources as well as increasing local food production.
To tackle this issue, Mr Lim said the Government can diversify food supply sources, which is what they have been doing, but he stressed that this solution is not always applicable.
Citing the worldwide rise in corn feed, Mr Lim said it's difficult to keep prices of chickens down when there is no cushioning available.