First, cost of living.
Some members had mentioned the latest EIU report, which ranks Singapore the most expensive city in the world.
And I know this is floating around and it is attracting a lot of attention.
I do not particularly want to focus on this report in its own right, but to explain a couple of very basic things about the reports
that will come out from time to time, whether it is EIU or Mercer, which are really aimed
at measuring expatriates' cost of living in different parts of the world.
And they are useful tools for HR managers and corporate HQs as they decide where to place their people.
And even when they are placing them in a particular place, how to compensate them adequately based on the cost of living.
It is a useful tool.
But these are basically aimed at comparing cost of living for expatriates in different cities or different countries in the world.
And, what this means therefore, is two things make an importance difference in these surveys.
And two things in these surveys are quite different from the factors that affect the cost of living for locals, for Singaporeans. Quite different.
First, currency. An important reason why, in fact, we have become an
expensive place for expatriates is that the Singapore dollar has strengthened.
And indeed, the EIU report points this out. The Singapore dollar has strengthened over
the years, particularly in recent years and this means that it is a more expensive place
for someone who is paid in a foreign currency, or for a corporate HQ abroad whose earnings
are in foreign currency. As the Singapore dollar strengthens, it becomes more expensive.
But the reverse is true for Singaporeans.
The stronger Singapore dollar improves purchasing power both in Singapore because
imported goods become cheaper (and for us, food and everyday items are all largely imported).
Secondly, it improves purchasing power even when Singaporeans go abroad -- you can see that from the latest travel fair last week.
So a stronger Singapore dollar, not sudden sharp appreciation, but steady appreciation,
has been good for Singaporeans but it does mean that it becomes a
more expensive place for expatriates.
The second important difference has to do with what goods and services are being measured
as part of the cost of living basket in these surveys.
And the EIU consumption basket, I wouldn't knock it, it is inevitably subjective,
but they are trying to put together a basket of what they think are expatriate costs.
Perhaps a little on the high-end, but expatriate cost.
And it is quite different from the goods and services
consumed by ordinary Singaporeans, which our Consumer Price Index (CPI) basket, for instance, measures.
So for example, the EIU basket includes imported cheese, filet mignon.
I am not sure which restaurant that is, but filet mignon.
Burberry-type raincoats, not very common in Singapore I think, but Burberry-type raincoats.
And I, of course, know very little about this.
Four best seats in a theatre; three-course dinners at high-end restaurants for four people.
These are items in the cost of living basket.
And I don't think they are irrelevant to an expatriate cost of living basket, but it is
quite a different from a cost of living basket for Singaporeans.
And indeed for some of these items, Singapore is expensive.
Transport is also a part of the cost of living basket for these expatriate indices.
But no public transport, it is just cars and taxis, and our public transport is in fact significantly
cheaper than most other cities -- New York, London and Tokyo.
We are about comparable to Hong Kong but significantly cheaper than most other cities.
Even our taxi fares are cheaper. But our cars are expensive because we are small.
So for an expatriate who wants to own a car, it is expensive in Singapore.
But if you are talking about an average Singaporean taking public transport, it is in fact much cheaper than many other cities.
So I highlight this just to point out the differences.
It is not that these surveys are wrong, it is not that they are misguided.
But they are measuring something quite different
from the cost of living for an ordinary local in different cities around the world.
Now, there are in fact unfortunately not very many surveys that truly try to measure the cost of living for ordinary residents.
But we have a very good study that was done by the Asian Competitiveness Institute in 2012,
which compared purchasing power in different cities.
And they specifically distinguished the cost of living for expatriates and the cost of living for a typical resident household.
And they looked at all sources of data, including
the EIU study, World Bank's International Comparisons Programme, and constructed
consumption baskets for expatriates and for ordinary residents.
And they found that Singapore was indeed quite expensive for expatriates compared to other cities.
At the time of their study, Singapore was
ranked 5th out of a 109 cities in the index in terms of costs for expatriates.
But costs for Singapore residents were very different. We were ranked 61st out of the 109 cities when
we compared the cost of living for residents, quite similar to other Asian cities
like Hong Kong, which was ranked 58th, or Seoul that was ranked 60th.
So that is the basic difference. From time to time, these surveys will come up,
and I know some people will give it a spin, but it is measuring something quite different from
the cost of living for our residents. What is important for us is that Singaporeans,
and particularly low- and middle-income Singaporeans, have incomes that grow faster than the cost of living.
That is what is important and in fact, that is what we have fortunately been able to achieve.
In the last five years alone, if you take our median households,
their incomes have gone up faster than the CPI index in the cost of living.
In fact, it has gone up by about 10% in real terms.
Similar rate of growth for the low-income household, about 10% in real terms.
And indeed, for the lower-income households, if you exclude from the CPI index imputed
rentals for those who are in fact owning their homes and they do not have to pay rentals,
we exclude that factor, then actually the increase in real incomes of the 20th percentile was 19% over the last five years.
So significant improvement, and we keep our eyes focused on that.
Keep our eyes focused on how the average Singaporean and the low-income Singaporean is doing
in their incomes, relative to the cost of living.