Another Billion-dollar Support Package? What’s this about?
As we’re formally exiting the pandemic—or well, living with the endemic—there are things about the world that we can no longer ignore, namely the current state of the economy and global inflation.
Global inflation is basically unavoidable as countries implement their respective stimulus packages to give their own economies a boost, alongside the increasing demand for products as the international borders open up again, while having to balance it out against supply shortages.
It was initially predicted that global inflation would eventually slow down, but then Russia decided to knock on Ukraine’s door rudely.
The Russo-Ukrainian War has only exacerbated the situation by causing an energy supply shortage, as well as shortages in certain important metals and grains that Russia and Ukraine are major exporters of.
The new $1.5 billion support package that Deputy Prime Minister (DPM) and Finance Minister Lawrence Wong introduced on Tuesday (21 Jun) is meant to combat inflation and help the most vulnerable cope with the rising costs.
The Current State of Things
As it stands, Singapore’s core inflation has increased to 3.3% year-on-year in April, beating the previous record of 2.9% that was set in March, thus marking 2022 as a year with the highest rates of inflation in the past decade.
In simpler terms, inflation means that the purchasing power of a consumer decreases because the prices of goods and services are increasing.
For example, you are earning $12 per hour. Chicken rice used to cost $3, but due to several reasons—like chicken supply shortage, increase in energy prices and rent—the price is pushed up to $4.
Hence, instead of being able to buy 4 packets of chicken rice per day, you can only buy 3. That is a decrease of purchasing power.
The biggest problem with accelerated rates of inflation, which we are facing right now, is that our salaries aren’t increasing at the same rate, which further decreases our purchasing power.
During the press conference, Mr Wong lays out the grim reality that energy and food prices have risen significantly, and they are likely to remain high for some time and even possibly increase more.
It will take time before things turn for the better, Mr Wong says, but that’s an optimistic outlook by all accounts, because it would require Russia to be less trigger-happy first, and for the two countries at conflict to reach an accord.
Between food and energy prices, it’s the latter that the government is most concerned about, since it’s literally the fuel that our society runs on.
Thus, the Government has decided to introduce support measures that will assist the lower-income and vulnerable groups, who are “disproportionately impacted by the effects of inflation”.
The Support Package is separated into different categories as per usual: for households and individuals, support for business, and assistance for lower-income and self-employed persons.
For Household and Individuals
1. To help with the increasing utilities bills, all Singaporean households, including those with private properties, will receive S$100 rebate on utilities by September.
2. For eligible adult Singaporeans, they will receive a one-off cash payment of up to S$300, on top of the $400 GST voucher that has been disbursed this year from Budget 2022.
This is expected to benefit 1.5 million Singaporeans, who have to be above 21 years old at least, with an assessable income of less than S$34,000 in 2021, and homes that have an annual value below S$21,000.
3. The amount of allowance that pensioners can withdraw per month has been increased by $30.
4. Cash handouts under the ComCare Long Term Assistance will be increased by $40, bringing the financial assistance to $640, and this arrangement is permanent.
As for individuals that are under Comcare Short-to-Medium Term Assistance, the amount of financial assistance each household will receive will be dependent on the household’s income, needs, and composition.
For Self-Employed Persons
5. For eligible private-hire and/or taxi drivers, they may receive a one-off relief of S$150 to cover increasing fuel costs by August.
This is because they mainly rely on transporting goods and people to maintain their livelihoods, and the increasing energy costs directly impact them.
6. Under NTUC Freelancers and Self-Employed Unit (U FSCE) Relief Scheme 2022, combi bus drivers, limousine drivers, delivery drivers and motorcycle drivers who are association members can receive a maximum payout of S$300.
However, this is on an application-by-application basis.
For Lower-Wage Workers
7. Through the Progressive Wage Credit Scheme, the Government will be co-funding 75% of eligible wage increases this year, an increase from the previously announced 50%, for employees with monthly wages up to S$2,500.
The Government will also co-fund 30% to 45% for employees with gross wages between $2,500 and $3,000.
For Small Business
8. Introducing the Energy Efficiency Grant, where the Government will provide up to 70% of the qualifying costs for businesses to adopt more energy-efficient equipment, in approved industries like food services, food manufacturing and retail sectors.
It will be capped at $30,000 per company.
9. The Enterprise Financing Scheme—Trade Loan was established with the intention of helping local business with cash flow problems. The upper threshold of loans has been increased from $5 million to $10 million from 1 July 2022 to 31 March 2023 next year.
The government will continue to bear 70% of the risk in the venture.
10. In order to encourage employers to hire mature job seekers who have been unemployed for six months, as well as people with disabilities or former criminals, the Job Growth Incentive, which offers help to employers will be extended to March 2023.
11. For the 11 local chicken slaughterhouses affected by Malaysia’s chicken export ban, they will be given one month of foreign work levy waiver.
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As you can see, the support package initiatives are very specific in who they are helping, and to what extent.
It was carefully crafted by the Ministry of Finance to ensure that they didn’t add to the inflationary pressures while ensuring that they were helping the most needy.
Hopefully with these extra measures, it can ease some of the burden that lower-income families and small businesses have.
Lastly, if you’re holding your breath and hoping that the GST hikes will be postponed, you will be passing out from asphyxiation soon, because Mr Wong declared that it will proceed as planned.
When 1 January 2023 comes around, the GST will be increasing from 7% to 8%.
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