Inflation of Singapore

Bachelor of transaction (Bridging) Intake 17 Elements of economics Contents accounting entry3 CPI ostentation4 MAS flash5 sequestered itinerary transport5 Accommodation6 Recommendation7 Conclusion8 References9 Inflation here up 5. 5% in declination Introduction Last December, capital of Singapores inflation, which is specify as a persistently rising price level, rose to 5. 5 per cent on a yr-on-year basis. The author states that CPI inflation is collectible to the modification and private course transport higher contribution. Further more(prenominal) than, the author also p atomic turn of events 18nt the MAS core inflation gaind to 2. per cent year-on-year due to the ongoing pass-through of earlier increasing costs. The extend from Decembers MASs Recent stinting ripenings in Singapore further supports the authors article. In this discussion, it could be argued that consumer want for lodgment and transport ar the major factors, which incision of Statistic Singap ore reported, contribute to the addition in inflation. In addressing the challenge of the presidencys to meet the consumer consume, the paper will mention a few discussions and a recommendation about the issue on inflation of Singapore.CPI and MAS Inflation CPI inflation CPI, or Consumer harm Index, measures the reasonable of the prices paid by urban consumers for a fixed basket of consumer trustys and suffice (Michael Parkin, 2011). In Singapore, the major contributing fixed baskets are Housing, Food and Transport. In total, these three factors are more than half of the entire CPI. Data extracted from the December 2011s CPI report is using year 2009 as the foot period, which is derived from a Household Expenditure Survey.As Singapore inflation rates are published monthly, the Singapore political relation is preventing bad or fictional speculations of afterlife inflation. pic extension Department of Statistic Singapore, 2012 Be funky table showing partial selective inform ation of Singapore CPI December 2011 FOOD 2,205 HOUSING 2,548 Accommodation 2,002 sack & utilities 357 Household durables 189 TRANSPORT 1,553 Private street transport 1,166 normal road transport 366 Other travel & transport 21 Source Department of Statistic Singapore, 2012 MAS inflation MAS core inflation is stated as a smaller amount than the CPI inflation in this article. This difference is due to MAS monitoring a core inflation measure that excludes components of Accommodation and Private road transport. Private road transport Data from Department of Statistic Singapore states that the everywhereall inflation of transport increased 10% from rifle years December with a detailed 12. 2% step-up for the sub category Private road transport. Singapore presidential term controls the number of vehicles on the island via placing a quota on COE.In mid October 2011, the Singapore Government announced that the annual growth rate will be fall smoothly until end of 2014 as veh icles population is growing faster than the political relations vehicle growth rate (Tony Ng, 2011). With the sharp increase in COE premiums in June and July 2011 (MAS, 2012), car prices surged, therefore defining the 12. 2% increment in Private road transport. As COE publish is tight, private road transport costs will re chief(prenominal) firm. Hence, contribution to the increased inflation is not entirely from private road transport, but from the other main fixed basket, Accommodation.Accommodation Singapores economy recovered fast unexpectedly, this is good freshs but with backlash as Singapores base of operations planmes could not keep pace, causing shortage in the housing program ( flower Minister Lee Hsien Loong, 2011). Since property temperature reduction measures were introduced by the government in year 2010, properties firms claimed that the number of deals closed fetch dropped by 30% compared to a year ago (PropertyWire, 2011). One of the upstart measures is that ho me owners being inevitable to sell off their flats first before qualifying to the higher curse give of 80% of next purchasing flats value.Most sellers favour buy first, then sell (Eugene Lim, 2011), causing them to disqualify from the higher loan and only facing with the maximum 60% loan from the banks. Now they have to produce 40% of purchasing flat value from their own cash. With such(prenominal) conditions, sellers are commanding higher cash premiums or cash over valuation (COV) resulting in more expensive or inflated resale flats. On the other hand, people who turn away from resale flats, with factor from the supplies of new flats that are slow in completion, are looking into rental accommodation.The other new cooling measurement the government has introduced is the Minimum Occupation Period (MOP). It is defined that flats stop be only being rented out after quintette years, increased from the previous one to three years period. As more Singaporeans and other people in Sin gapore are looking for end dwellings, the inflation in accommodation is caused by high demand and low supply. Recommendation pic Supply and need Graph Source Irena Asmundson, 2010. Demand and supply curves are charted as shown above.As prices rises, suppliers are willing to produce more and consumers buying slight (Irena Asmendson, 2010). In addition, the demand for accommodation is high and the supply is low, Singapore accommodations price has inflated. To solve this increasing demand and shortage of accommodation, Singapore government has been producing more HDB apartments. From the key statistic from the Housing and Development Board, there are 43,030 apartments under construction in the fiscal year of 2010/2011, a 20. 8% increased from the previous fiscal year.A huge increase of 68. 6% apartments completed from the previous year further reinstate the governments effort to lower the shortage of accommodation, but the total bookings for new flats are 17,419, less than half the number of apartments under construction. This difference can be defined as a huge number of unsold or surplus apartments as HDB in the market. If this is to be true, the huge number of unsold apartment will lower the prices, causing suppliers to produce less and consumers buying more. ConclusionSingapore CPI inflation rate in December is staggeringly contributed from the factor of accommodation and private road transport. In conclusion, the increased COE premiums and accommodation shortage can the detailed explanation. The Singapore government has been doing readjustment in the property market and private road transport. With introduction of new cooling measures and building of more new apartments, the government can curb or lowered the accommodation inflation rate. Inclusion with the huge surplus of unsold apartment, the accommodation inflation rate can be lowered to with the demand and supply law.Word count 932 References Michael Parkin, 2009. Economics. 10th edition. Pearson Addi son Wesley Department of Statistic Singapore (2012, January 25). Singapore Consumer Price Index December 2011. Department of Statistic Singapore. Retrieved from http//www. singstat. gov. sg/news/news/cpidec2011. pdf Accessed 6 February 2012 Matthew Bishop (2004, April). Economics A-Z. The Economist. Retrieved from http//www. economist. com/economics-a-to-z/inode-21529397 Accessed 6 February 2012 Monetary Authority of Singapore (2011, December 8).Recent Economic Developments in Singapore. Monetary Authority of Singapore. Retrieved from http//www. mas. gov. sg/resource/eco_research/eco_dev_ana/Recent_Economic_Developments. pdf Accessed 7 February 2012 Tony Ng (2011, October 19). COE premiums pass water record hit. AsiaOne Motoring. Retrieved from http//www. asiaone. com/Motoring/News/Story/A1Story20111019-305931. html Accessed 8 February 2012 found Minister Lee Hsien Loong (2011, August 14). National Day Rally 2011. Prime Ministers Office, Singapore. Retrieved from http//www. pmo. g ov. g/content/pmosite/mediacentre/speechesninterviews/primeminister/2011/August/Prime_Minister_Lee_Hsien_Loongs_National_Day_Rally_2011_Speech_in_English. html Accessed 8 February 2012 Property Wire (2011, October 10). PropertyWire, Asia. Shortage or resale flats driving up prices in Singapore. Retrieved from http//www. propertywire. com/news/asia/singapore-real-estate-shortage-201110105661. html Accessed 8 February 2012 Irena Asmundson (2010, June). Finance and Development. Back to fundamental Supply and Demand. Retieved from http//www. imf. org/external/pubs/ft/fandd/2010/06/basics. htm Accessed 9