Last Saturday’s Straits Times headline read: October inflation hits 16-year high of 3.6% . It was definitely loud and clear, and grabbed the attention of many Singaporeans like myself.

The ST reported in that article that DBS Bank’s Irvin Seah “fell over his chair” when the figure was revealed. “This is way beyond market analyst expectations,” he further added. “We knew inflation would go up. We just didn’t know it would come so quickly.”

That was the kind of reaction that the news of the inflation had.

Though the affects of rising costs had been felt for 1-2 months ago, this latest news was a confirmation of the dreadful reality that the average Singaporeans had been living in.

Reasons for inflation

It was mentioned that prevailing oil and food prices contributed to the rise in inflation. China, for instance, reported that prices last month rose the fastest in a decade.

And disturbingly, the 2 per cent hike in the goods and services tax (GST) in July was attributed as another major cause for the already rising prices.

This is definitely not good news, especially for the lower income group. Already the income gap has been widen and with this inflation, life with be more difficult in coping with the high cost of living in Singapore.

The GST hike in question

When Prime Minister Lee Hsien Loong first announced his plans to increase the GST prices from 5 percent to 7 percent on 13 November 2006, here was his reason:

Speaking in Malay, Mandarin and English, Mr Lee explained that the hike was necessary to finance the enhanced social safety nets, needed to help the lower income group and he emphasised that the offset package would more than counter the rise in GST.While Singapore’s current model to tackle the widening income gap is sound, Mr Lee said the government would take on two approaches to deal with the new environment – to strengthen the safety nets and tilt the balance in favour of the lower-income groups who do not benefit from the fruits of economic growth.

However, from the recent article by Reuters about Singapore’s economy boom widens income gap and with the figures of the swift-arising inflation presented to us, things do not seem to be happening in favour of the lower income group at this point of time as planned.

In fact, it appears that things are worse off than before- the gap widening more and the lower income struggling even more to survive or keep up.

Uncovering the real deal

But with all honesty, how can a GST hike help the lower income when they are the main group people that would feel the affects?

Even the rich (those that should be the ones heavily taxed) with their busninesses and investments get tax rebates on GST and corporate tax schemes that works to their advantaged. And we all know that legally, there are ways to avoid being tax and keeping/earning more money as owners of businesses.

So the rich gets richer if not remain rich and the poor even poorer.

How can this be for the lower income group?

Therefore at this moment, it looks like it is the lower to middle income (the mass) group that are truly footing the bill for the economic development in Singapore with the high income group continuing reaping the “juiciest” fruits of our economic growth.

This cycle never ends.

What is the real agenda?

But to be fair, the full intented results of the GST hike might not have reached its potential yet. Therefore even with the contradicting predicament, we should still wait and see if PM Lee and his party delivers the goods for the lower income.

My personal view is that the GST hike was not the main agenda to help the lower income group, but an excuse to soften the resistant towards the idea. As it seems the real agenda is uncovered little by little with all the buzz on our economic development.

In short, our raised budget are mainly channelled in footing the massive bills incurred by our investment in R&D, Intergated Resorts, F1 Race and etc…

To this, I question if the lower income group has really benefitted from this developments. Cos I seriously doubt employment/business opportunities would be made primarily available for them. Instead, I forsee that our lower income group will be slogging and begging even more for whatever “scraps” that are left behind.