Just when you thought life couldn’t get any worse, the government drops some very ominous hints that they’re going to raise the GST to 8% in 2023, and 9% in 2024.
In the lead up to Budget 2022 on 18 Feb, the GST hike was the talk of the town, along with the usual bread and butter issues like inflation and the rising cost of living.
Many Singaporeans have started to feel the pinch in Dec 2021 and Jan 2022. For instance, hawker stalls have already started jacking up their prices in Jan 2022 to cope with the rising cost of everything.
Some businesses have even taken advantage of the GST hike to raise prices above and beyond the 2% increase. For instance, the ironically-named Rich and Good Cake Shop, which used to see snaking queues daily, has raised prices by up to 33%, much to the fury and wrath of Singapore netizens. Luckily for them, they will soon cease to be the target of customers’ rage when every other business on the island hikes up their prices.
Sadly, your morning prata and your shopping mall hauls aren’t the only things that are going to get more expensive this year. Here are five key things that we’ll have to fork out more for in Singapore in 2022.
Oil and gas
Oil and gas prices are rising worldwide. And this time, we can’t even blame it on the GST. This price hike has been caused by a smorgasbord of factors, including extreme weather, dwindling supplies and rising demand, especially from China, in the aftermath of the Covid-19 recession. Oil prices surged by about 50% in 2021 and are expected to go even higher this year. To rub salt in the wound, Singapore hiked petrol duties in 2021.
Vehicle owners have been the first to feel the pinch, but soon everyone else will, too. Rising oil prices will eventually result in higher public transport fares, higher car hire fares, higher taxi fares and higher air ticket prices.
And because most businesses rely to some extent on transport and travel, higher oil prices will also raise business costs, meaning we’ll end up paying more for everything from consumer goods to food.
The bulk of Singapore’s electricity comes from imported natural gas whose price is pegged to oil prices. So, basically, expect to pay more for electricity this year.
SP Group has already announced a hike in electricity and gas tariffs in the first quarter of 2022, and the other energy companies will also likely follow suit. Hopefully they can reinvest some of this money in green initiatives to achieve carbon neutral/zero status.
MRT, bus, taxi, Grab or Gojek prices
Transportation is extremely sensitive to oil prices, so unless you do most of your commuting on foot or by bicycle, it’s going to get more expensive to get from Point A to Point B, whether you opt for public transport or prefer to hail a cab or private hire car.
Comfort Delgro has already announced a fare hike, and we’re waiting with bated breath for SMRT, SBS and other transport companies to do the same. SBS has announced that they will be purchasing cleaner-energy public buses from now on. But given that electricity sources here are not exactly clean, that will not translate to lower fares.
Higher petrol prices are going to hit vehicle owners in the face.
To add insult to injury, COEs are now sky high, with motorcycle COEs having crossed the $10,000 mark for the first time in history.
Demand for vehicles will continue to be high as private transport is more attractive than squeezing onto public transport in a pandemic, and more are now turning to motorcycles in order to work as food delivery riders.
The government plans to reduce household water consumption to 130 litres per capita per day by 2030.
Unfortunately, they can’t control the weather to save us from having to take three showers a day. So, instead, they’re likely to try to reduce household consumption by raising prices.
Property prices have been climbing throughout most of the pandemic as Singaporeans scramble to buy new homes so they can finally have the space to WFM in peace.
According to Frank Knight Singapore, residential property prices are expected to rise 1% to 3% in 2022 in spite of the new cooling measures introduced in December 2021. Rents are also expected to rise, with JLL expecting a 5% to 7% increase in 2022.
Yes, it’s really getting increased to 9%.
Due to all the factors enumerated above, food and beverage businesses will be some of the hardest hit, with higher electricity and water bills, higher delivery costs for their ingredients, and higher rent. In other words, get ready to pay more or eat less.
Why do things get more expensive over time?
Inflation is caused by a cocktail of factors that affect the supply and demand of products on the market. Anything that affects one or the other can cause inflation or deflation.
In Singapore’s case, very simplistically speaking, there’s a lot more money in circulation in 2022 and a lot more people spending it than a few decades ago. Back then, becoming a millionaire was the ultimate goal in life of the pioneer and boomer generation. These days, you’re only rich if you’re a billionaire. More money and a higher demand for goods and services pushes prices upwards.
Why does inflation occur?
In Singapore’s case, one of the key drivers of inflation is our growing population, particularly due to the huge spike in immigration in the 2010s. More people means more demand for goods and services.
Another key reason is that our economy and GDP continue to rise. Some years are better than others but overall, both are still on a steady upward trajectory. GDP growth generally goes hand in hand with inflation as people spend more over time. Modest inflation due to GDP growth is better than deflation, which is what Japan, for example, has been experiencing for two decades.
How to deal with the high cost of living and increase?
For ordinary, non-tycoons, inflation means having to ensure that your income, whether through work, business, investments, passive income streams or whatever, keeps up with inflation over time. In other words, you have to make sure you can keep up or get left in the dust.
There are two key ways to do this: increasing your income, and reducing your spending. The approach you favour depends on how much you love/hate working and how much you’re willing to sell out for money.
Here are some ways to lower your cost of living relatively painlessly:
- Minimise and eliminate existing debt, and avoid getting into more debt – Prioritising paying off all your credit card bills in full is a must before tackling the rest of your debt.
- Refinance your home loan – This lowers your interest payments and can save you hundreds every month.
- Make full use of government subsidies whenever you qualify – Make sure you find out what’s available and apply for everything you’re eligible for.
Use credit cards strategically to lower your everyday spending
For example, OCBC FRANK gives you 6% cashback on online shopping, mobile payments and foreign currency spending.
Citi Cash Back Card gives you 8% cashback at supermarkets and 6% on dining.
- Cash Back on Dining, Groceries & Petrol
- Up to 8%
- Total Cash Back Cap, per month
- From Shell & Esso
- Up to 20.88% savings
Apply and Spend $500 to get S$350 Cash via PayNow OR a NEW Apple Watch SE (worth S$379) OR BOSE QuietComfort Earbuds II (worth S$379). T&Cs apply.
What are your tips and tricks for surviving in a country with high cost of living? Let us know!