Thursday, November 16, 2006

The truth is out there - in the pasar

Actually, the value of the S$ has gone done - domestically, that is. According to my wife's pasar economics, in the 4 years that we have lived in Sengkang, which is a suburban satellite town in the north-east of Singapore, the things that the S$ can buy has been reduced. This is what economists (I mean real economists) call 'purchasing power'.

  1. It used to be that one could buy 5 rolls of chee cheong fun for S$1. Now, you only get 4 rolls for a S$1. That is an increase of 20% in cost to the consumer. With the impending rise of the GST, I don't expect to get more than 3 rolls for the dollar.

  2. It used to be that one could get 12 fishballs for S$1.30. Now the stallholder will only give you 10 fishballs for the same S$1.30. That's an increase in cost to the consumer of about 16%. Who knows, with the latest proposed increase in GST, we may end up with just 8 fishballs for the same price.

Well, people do raise prices but do not follow GST quantums:
  1. An average meal (not including drinks) at our ubiquitous foodcourts used to cost S$3. Now it is S$3.50. That's an increase about 17%.

  2. It used to cost S$1 for a packet of fried rice noodles (chow mee fen). Now, for the same quantity, that's S$1.20 - an increase of 20%.

My point, really, is that besides looking at the numbers crunched by the government statisticians, the government should also consult our pasar economists to find out the true impact of any increase in indirect taxes. A 2% increase in taxes does not necessarily translate to a 2% increase in prices or a 2% reduction in purchasing power. Inflation numbers from the DOS fails to consideer certain dynamics at play on the ground. Ceteris paribus doesn't work when you deal with the pasar, does it?

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