WEBVTT - GST hike: How to manage your money better 0:00:00.000 --> 0:00:04.350 money talks is brought to you by OCBC Bank 0:00:06.269 --> 0:00:08.500 in a few words. Could you give us your quick 0:00:08.500 --> 0:00:11.610 thoughts on the following GSD hike? 0:00:12.530 --> 0:00:18.189 Painful but necessary. Hopefully short term impact 0:00:18.200 --> 0:00:20.560 higher price is 0:00:20.570 --> 0:00:26.060 going to impact everybody. But let's hope we can cut 0:00:26.060 --> 0:00:27.320 down our spending 0:00:27.330 --> 0:00:29.910 spending habits very 0:00:29.910 --> 0:00:34.159 sticky. We want consumers to change them and be more prudent. 0:00:34.690 --> 0:00:37.010 The year 2023. 0:00:37.020 --> 0:00:40.670 It should be a better year than 2022. 0:00:40.680 --> 0:00:42.280 Thank you so much. 0:00:56.380 --> 0:00:59.200 Hi, I'm Sarah Alcalde and thanks for joining us on 0:00:59.200 --> 0:01:03.280 money talks. If you're feeling the pinch from higher prices, 0:01:03.290 --> 0:01:08.370 brace yourself because items are about to get more expensive. 0:01:08.380 --> 0:01:12.010 The goods and services tax, or GST, is such an 0:01:12.010 --> 0:01:16.300 increase from 7% to 8% next January 0:01:16.550 --> 0:01:21.339 and another rise is scheduled for 2024. It's happening as 0:01:21.340 --> 0:01:25.550 inflation creeps higher and is expected to stay high in 0:01:25.550 --> 0:01:28.959 the first half of next year. Add to that higher 0:01:28.959 --> 0:01:33.370 mortgage rates, which have squeezed budgets and tighter rules on 0:01:33.370 --> 0:01:38.500 property purchases. All these factors have likely made you rethink 0:01:38.500 --> 0:01:42.800 your spending and how much you set aside for different needs. 0:01:43.000 --> 0:01:47.080 So with expenses increasing all around, how should you manage 0:01:47.080 --> 0:01:50.480 your finances? And what are the best ways to cope 0:01:50.480 --> 0:01:54.230 with the upcoming GSD increase? To help us make sense 0:01:54.230 --> 0:01:58.160 of this GSC hike, I'm joined by Sumit Agarwal, professor 0:01:58.160 --> 0:02:01.390 of finance economics and real estate at N. U S 0:02:01.390 --> 0:02:02.430 Business School 0:02:02.940 --> 0:02:06.410 Professor Sumit. Thanks so much for joining us today and 0:02:06.410 --> 0:02:08.990 talking about this very important topic. 0:02:09.000 --> 0:02:10.080 You're welcome. 0:02:10.150 --> 0:02:15.070 It seems like there is really no escaping higher GSD, right? 0:02:15.090 --> 0:02:18.290 Yes. I mean, I think the government was trying to 0:02:18.290 --> 0:02:21.530 push it off by as much as they could because 0:02:21.530 --> 0:02:26.310 they had announced it already 34 years ago. And then 0:02:26.310 --> 0:02:27.690 because of covid, 0:02:27.700 --> 0:02:30.889 they try to kind of push it back. They try 0:02:30.889 --> 0:02:33.190 to do it in stages now that they will do 0:02:33.190 --> 0:02:37.110 it in two steps, but it's inevitable it has to 0:02:37.110 --> 0:02:37.870 go up. 0:02:37.880 --> 0:02:41.810 Inflation is high. Mortgage rates are creeping up to Why 0:02:41.810 --> 0:02:44.160 do we need to raise taxes now? 0:02:44.169 --> 0:02:49.840 It's a complicated answer, so clearly, if you believe inflation 0:02:49.850 --> 0:02:53.760 is high, which it is right now, you want to 0:02:53.760 --> 0:02:56.280 actually slow down spending 0:02:56.460 --> 0:03:00.290 the governments around the world through the monetary policy through 0:03:00.290 --> 0:03:04.590 the central banks, raise the borrowing rates of the banks. 0:03:04.600 --> 0:03:09.799 That raises the rates of lending to consumers that causes 0:03:09.800 --> 0:03:12.660 consumers to not buy things like houses. 0:03:12.889 --> 0:03:15.640 If you raise the interest rate on mortgages, they are 0:03:15.639 --> 0:03:18.780 not going to buy a house. Similarly, if you raise 0:03:18.780 --> 0:03:22.440 the taxes or your ability to go out and spend 0:03:22.440 --> 0:03:26.760 money for dinners or shopping for handbags or luxury goods 0:03:26.770 --> 0:03:30.300 through the GST, you're not going to go out and 0:03:30.300 --> 0:03:34.639 buy those things, and so you will curb inflation. But 0:03:34.639 --> 0:03:37.640 on the other side, you also raise an important point. 0:03:37.960 --> 0:03:41.770 If you are going to raise GST, you still have 0:03:41.770 --> 0:03:46.210 needs for necessary goods like food and other items that 0:03:46.210 --> 0:03:50.820 are important to you. So raising the GST when inflation 0:03:50.820 --> 0:03:54.570 is already high will also hurt people, 0:03:54.920 --> 0:03:58.600 so you can see it can go both ways. Raising 0:03:58.600 --> 0:04:01.370 GS Steve Inflation is high is a good thing, but 0:04:01.370 --> 0:04:03.970 raising GS Steve and inflation is high can also be 0:04:03.970 --> 0:04:07.610 a bad thing because taxes on your necessary items can 0:04:07.620 --> 0:04:09.210 hurt your pocketbook. 0:04:09.220 --> 0:04:14.760 But this GSC increase was announced before inflation was an issue. 0:04:14.770 --> 0:04:20.210 So why is GSD being increased? Where will this extra 0:04:20.220 --> 0:04:21.940 taxes go? 0:04:21.950 --> 0:04:24.580 If you think about a GSD itself, 0:04:24.910 --> 0:04:29.640 it's kind of a regressive tax because a progressive taxation 0:04:29.650 --> 0:04:33.420 structure you will raise the marginal tax rate for the 0:04:33.420 --> 0:04:38.820 highest earners. So the richest people pay higher taxes. It 0:04:38.820 --> 0:04:39.610 makes sense. 0:04:40.350 --> 0:04:44.320 GST is an increase in tax for everybody, from the 0:04:44.320 --> 0:04:47.850 poorest person to the richest person. You would think that 0:04:47.850 --> 0:04:51.250 the burden will fall more on the poor person in 0:04:51.250 --> 0:04:54.630 paying taxes through GST. But what the government is doing 0:04:54.630 --> 0:04:58.260 then is taking all the revenue additional revenue they're going 0:04:58.260 --> 0:05:02.860 to earn through GST taxation. And part of that they 0:05:02.860 --> 0:05:07.350 will give in terms of kickbacks are rebates to the 0:05:07.350 --> 0:05:08.550 low income people. 0:05:08.779 --> 0:05:12.400 So they're trying to make it more progressive by taking 0:05:12.400 --> 0:05:14.919 part of the GST money and giving it to the 0:05:14.920 --> 0:05:19.360 low income families. It's still not as progressive as you 0:05:19.360 --> 0:05:23.270 raising the income tax rate for the super rich, which 0:05:23.270 --> 0:05:26.980 the government has also done. Right now, they're raising 1% 0:05:26.980 --> 0:05:30.640 tax rate income tax rate for the most wealthy people. 0:05:31.279 --> 0:05:36.430 How do you think this will affect household budgets if 0:05:36.440 --> 0:05:41.100 everybody is going to face higher taxes, considering all the 0:05:41.110 --> 0:05:44.910 other things that are more expensive nowadays, households have to 0:05:44.910 --> 0:05:50.029 face higher mortgages, groceries, petrol is expensive. So how will 0:05:50.029 --> 0:05:51.710 this affect budgets? 0:05:51.720 --> 0:05:55.750 Yes, clearly, it will definitely affect the consumer budget. 0:05:56.380 --> 0:05:58.950 So the government's plan is to give back some of 0:05:58.950 --> 0:06:01.870 the money to the low income people. So what will 0:06:01.880 --> 0:06:04.620 end up happening is the middle class will be more 0:06:04.620 --> 0:06:08.740 squeezed than anybody else. And the middle class will feel 0:06:08.740 --> 0:06:13.099 the biggest pinch of the GST tax rate because they 0:06:13.100 --> 0:06:16.640 also spend a lot. They are spending not just necessary 0:06:16.640 --> 0:06:20.360 good but part on more luxury or travel and eating 0:06:20.360 --> 0:06:23.110 out so they will be affected. And they 0:06:23.120 --> 0:06:26.359 We'll either have to cut down consumption, which may be 0:06:26.360 --> 0:06:28.730 the right thing to do for them. Or they may 0:06:28.730 --> 0:06:32.950 end up borrowing or smoothing consumption through borrowing from their 0:06:32.950 --> 0:06:36.450 future Selves. If I assume my GST is going to 0:06:36.450 --> 0:06:39.750 go up, but inflation will come down in the future, 0:06:39.760 --> 0:06:42.260 I don't want to cut down my spending habits because 0:06:42.260 --> 0:06:44.419 I love what I do and I don't want to 0:06:44.420 --> 0:06:46.960 go out to a cheaper restaurant. I still want to 0:06:46.960 --> 0:06:50.029 go to the same restaurants every day or every week. 0:06:50.040 --> 0:06:52.670 I will just start borrowing more on my credit cards 0:06:53.160 --> 0:06:55.810 so we don't know how it will go. How consumer 0:06:55.810 --> 0:06:59.230 sentiment will be. Do the cut down consumption. Are they 0:06:59.230 --> 0:07:02.700 rational and saying GSD is going to hurt my pocket books? 0:07:02.700 --> 0:07:05.489 I should cut down consumption or do I keep consuming more? 0:07:05.500 --> 0:07:08.600 You keep consuming more. But put it on the credit 0:07:08.600 --> 0:07:12.060 card and get yourself into more debt. Basically, is the 0:07:12.060 --> 0:07:12.870 other option. 0:07:13.040 --> 0:07:18.210 What should we do then? To manage this GSD increased 0:07:18.210 --> 0:07:22.280 responsibly on a personal level. If I know that everything 0:07:22.280 --> 0:07:25.670 else is more expensive and it's about to get more expensive, 0:07:25.680 --> 0:07:27.530 what should we do? 0:07:27.540 --> 0:07:30.930 The prudent thing or the rational thing for the consumer 0:07:30.930 --> 0:07:31.900 is to say 0:07:32.180 --> 0:07:35.590 I have a basket of things I need to do 0:07:35.600 --> 0:07:38.600 every month. Part of that could be paying rent. Part 0:07:38.600 --> 0:07:41.930 of that could be paying my mortgage. It's also paying 0:07:41.930 --> 0:07:45.010 to Shin, which have gone up for my Children, uh, 0:07:45.020 --> 0:07:48.090 many other things there. I can't do much. There is 0:07:48.090 --> 0:07:51.140 not much room for me to change my lifestyle, but 0:07:51.140 --> 0:07:53.960 there are lots of other things which is eating out 0:07:53.970 --> 0:07:57.910 or going to more eateries or travel those I could 0:07:57.910 --> 0:07:59.720 cut down for the time being, 0:08:00.000 --> 0:08:03.700 mainly because this is going to be affecting my budget. 0:08:03.710 --> 0:08:06.840 My budget constraint is there, and GST is just going 0:08:06.840 --> 0:08:09.370 to make my budget constraint even tighter. 0:08:10.230 --> 0:08:13.750 Now I hope many people realise that this is good. 0:08:13.760 --> 0:08:17.860 GS TVs is inevitable because the government needs to raise 0:08:17.860 --> 0:08:21.250 more revenue because the government in the past few years 0:08:21.250 --> 0:08:25.450 had to have more expenses because of covid and going forward. 0:08:25.450 --> 0:08:28.100 They're also investing much more and the government ended up 0:08:28.100 --> 0:08:29.510 borrowing from their reserves. 0:08:30.310 --> 0:08:32.940 So the people may have to say I need to 0:08:32.940 --> 0:08:39.260 cut down my expensive, especially my discretionary expenses by nondiscretionary expensive. 0:08:39.270 --> 0:08:41.969 I can't change. I mean those I have to incur 0:08:41.980 --> 0:08:43.090 their inevitable. 0:08:43.390 --> 0:08:46.740 How about you professors to make you mentioned? How twisted 0:08:46.740 --> 0:08:51.250 and for your Children Now more expensive. Have you changed 0:08:51.250 --> 0:08:53.660 how you're spending? First 0:08:53.660 --> 0:08:57.970 you start dipping into your savings. Start dipping in your savings. 0:08:57.970 --> 0:09:01.010 So you say. Okay, Hopefully wages will go up in 0:09:01.010 --> 0:09:03.580 the future. Inflation will go away. So for now, let 0:09:03.580 --> 0:09:06.530 me try to dip on my savings. Second, you may 0:09:06.530 --> 0:09:09.220 start using your credit card. Third, you make consumption. So 0:09:09.220 --> 0:09:10.510 I'm trying to do all three. 0:09:10.790 --> 0:09:14.280 So actually cut consumption where it is frivolous. Try to 0:09:14.280 --> 0:09:16.780 say OK Let's not do certain things. Let's not go 0:09:16.780 --> 0:09:21.370 on certifications or more expensive vacations and also kind of 0:09:21.370 --> 0:09:23.569 dip in the savings. And we see that I can 0:09:23.570 --> 0:09:26.470 give you a very nice example on Singapore. 0:09:26.820 --> 0:09:31.030 Actually, a few years ago, when Singapore raised the marginal 0:09:31.030 --> 0:09:34.450 tax rate for the super rich, that increase the marginal 0:09:34.450 --> 0:09:39.330 tax rate by 2% was going to actually reduce consumption 0:09:39.330 --> 0:09:41.890 of the rich because now they pay higher taxes, so 0:09:41.890 --> 0:09:44.540 their disposable income is law. What we see in the 0:09:44.540 --> 0:09:48.510 data of rich Singaporeans they did not cut down consumption 0:09:48.520 --> 0:09:51.679 is that they just dipped in their savings, their savings 0:09:51.679 --> 0:09:55.050 balance goes down, the consumption doesn't go down 0:09:55.390 --> 0:09:57.750 and what the Singapore government did, then they took that 0:09:57.750 --> 0:10:00.340 money and gave it to the poor in terms of 0:10:00.340 --> 0:10:04.339 redistribution of their taxes. And you see the poor actually 0:10:04.340 --> 0:10:06.800 spend more because now they are getting free money or 0:10:06.809 --> 0:10:09.320 a tax rebate from the government. The poor end up 0:10:09.320 --> 0:10:12.530 spending so you can see the cycle in some sense, 0:10:12.530 --> 0:10:16.080 how redistribution works and also not hurt the rich consumption 0:10:16.090 --> 0:10:17.640 because they just use their savings. 0:10:18.090 --> 0:10:20.839 Yeah, but you need to have savings. Then that's also 0:10:20.840 --> 0:10:23.670 one key thing before all this happened. So you have 0:10:23.670 --> 0:10:26.380 something to pick up when you need it. 0:10:26.390 --> 0:10:30.050 I agree. Hence the government is being prudent. Realising the 0:10:30.050 --> 0:10:32.210 poor may not have the savings, so we need to 0:10:32.210 --> 0:10:34.930 give them back. The middle upper middle class may have 0:10:34.929 --> 0:10:38.110 some savings and they do. I mean, the pandemic caused 0:10:38.110 --> 0:10:40.120 a lot of people to save a lot of money. 0:10:40.130 --> 0:10:42.580 And that's why we are seeing inflation. And so now 0:10:42.580 --> 0:10:43.040 they'll just 0:10:43.054 --> 0:10:45.705 kind of spent a lot of their savings. I mean, 0:10:45.705 --> 0:10:47.965 a lot of the people who are upper middle class, 0:10:47.975 --> 0:10:50.425 they didn't go to work. They just didn't buy clothes. 0:10:50.425 --> 0:10:53.074 They didn't buy makeup, they didn't buy lots of things. 0:10:53.085 --> 0:10:55.595 So all that money was saved up for the last 0:10:55.595 --> 0:10:58.485 34 years, and now they may end up either spending 0:10:58.485 --> 0:11:02.345 because Syria, rice Or actually, that's also the reason we 0:11:02.345 --> 0:11:05.595 had inflation. Because people realised that all the savings I 0:11:05.595 --> 0:11:07.475 can travel Let me spend all this money 0:11:07.475 --> 0:11:08.015 out. 0:11:08.260 --> 0:11:13.239 Yeah, and all that money we saved from not travelling anywhere, right? Yes. 0:11:17.470 --> 0:11:20.530 Hi. I'm Adrian Tan and I'm Crispino Robert. We are 0:11:20.530 --> 0:11:23.420 the host of a new podcast called working. We're here 0:11:23.420 --> 0:11:25.860 to get into the essential things that no one tells 0:11:25.860 --> 0:11:28.960 you about working in company culture, from office politics to 0:11:28.960 --> 0:11:32.270 dealing with burnout. If you've ever wanted to eavesdrop on 0:11:32.270 --> 0:11:35.900 an interesting conversation by the water cooler, this podcast is 0:11:35.900 --> 0:11:38.780 for you. Look out for our episodes wherever you get 0:11:38.780 --> 0:11:39.670 your podcast. 0:11:44.100 --> 0:11:48.030 It has been a while, though, since GST was last raised. 0:11:48.040 --> 0:11:51.960 If they look back last time or when other countries 0:11:51.960 --> 0:11:56.340 raised their GST, their taxes, what do you think we 0:11:56.340 --> 0:12:01.240 can expect after this GSD hike? And what lessons can 0:12:01.240 --> 0:12:03.940 we take from previous examples 0:12:03.950 --> 0:12:07.099 people have studied? Academics have been studying this thing. I 0:12:07.100 --> 0:12:11.230 have looked at GST tax rate changes in India, which 0:12:11.230 --> 0:12:12.750 just recently happened. 0:12:12.765 --> 0:12:16.155 I've looked at similar things in the U. S. And 0:12:16.165 --> 0:12:22.645 other countries. What happens? Typically, consumers consumption basket will shrink, 0:12:22.655 --> 0:12:26.865 so that's one thing. They will actually spend less. On average, 0:12:26.875 --> 0:12:32.665 in every 1% point, rates in GST may actually shrink 0:12:32.665 --> 0:12:36.885 the consumer basket from 5 to 7% so that's one thing. 0:12:36.915 --> 0:12:40.094 The other thing that happens. Typically there's a shift in 0:12:40.095 --> 0:12:41.415 the consumption basket. 0:12:41.790 --> 0:12:47.030 They will shift away from discretionary items to non discretionary 0:12:47.030 --> 0:12:50.890 items or in some sense, not take those vacations, not 0:12:50.890 --> 0:12:54.510 go out and eat at expensive restaurants. But focus on 0:12:54.510 --> 0:12:58.080 doing going to McDonald's more rather than going to an 0:12:58.080 --> 0:13:01.370 expensive restaurant so that we'll see both of those shifts. 0:13:01.380 --> 0:13:04.429 We have seen similar things in the data in other countries, 0:13:04.440 --> 0:13:08.090 and we should see something like that in Singapore as well. 0:13:08.410 --> 0:13:12.120 And when you look around at how we're spending, what's 0:13:12.120 --> 0:13:15.579 your sense of how Singaporeans are coping with the rising 0:13:15.580 --> 0:13:16.730 cost of living 0:13:16.760 --> 0:13:21.040 look? Cost of living has been going up in the U. S. Context. 0:13:21.040 --> 0:13:24.140 We are again looking at this, this effect of inflation 0:13:24.140 --> 0:13:28.670 and consumer spending that itself is going to moderate spending 0:13:28.679 --> 0:13:33.760 because inflation and how the government will respond. I mean, 0:13:33.760 --> 0:13:37.559 we see mortgage rates in Singapore have gone up dramatically 0:13:37.770 --> 0:13:41.690 when mortgage rates go up, then your budget constraint becomes 0:13:41.690 --> 0:13:44.550 tighter or your debt service burden goes up, and I 0:13:44.550 --> 0:13:48.550 have to pay more money to my bank in interest payments. 0:13:48.570 --> 0:13:51.420 When I have to do that, I can't spend money 0:13:51.420 --> 0:13:54.080 anymore on other things. I can't take vacation 0:13:54.295 --> 0:13:58.005 or I can't buy fancy clothes anymore, So people have 0:13:58.015 --> 0:14:01.715 been cutting down now. I don't have exact data for 0:14:01.715 --> 0:14:05.454 Singapore yet, but we will end up seeing similar results 0:14:05.565 --> 0:14:08.045 now on the GST is will be very difficult to 0:14:08.045 --> 0:14:10.415 quantify this because 0:14:10.650 --> 0:14:16.439 typically when GST raises by a significant amount, let's say 34% 0:14:16.510 --> 0:14:19.650 then you can actually study this in the data that 0:14:19.650 --> 0:14:23.560 consumption dropped. But GST going up by 1% is just 0:14:23.560 --> 0:14:26.740 very hard to pick it up in the data and 0:14:26.740 --> 0:14:27.860 see Look, I can show you 0:14:27.870 --> 0:14:31.380 how consumption is dropping because there are so many other things. 0:14:31.390 --> 0:14:35.150 Sometimes people just make smooth consumption through credit cards and 0:14:35.150 --> 0:14:38.250 other things, so it's difficult to pick this up. 0:14:38.260 --> 0:14:43.120 Prices are interest rates are it is a tough time 0:14:43.120 --> 0:14:45.090 financially for many. 0:14:45.320 --> 0:14:49.260 How long do you think this will go on for? 0:14:49.270 --> 0:14:52.560 Is this a new normal of prices going up so fast? 0:14:52.570 --> 0:14:55.410 Mortgage rates going up so fast as well? 0:14:55.420 --> 0:14:58.990 I don't think so. There are a few factors that 0:14:58.990 --> 0:15:04.860 caused this situation first. Clearly the pandemic that caused huge 0:15:04.870 --> 0:15:09.630 government fiscal stimulus plants around the world that caused inflow 0:15:09.630 --> 0:15:13.450 of money to the balance sheet of the consumer. Second, 0:15:13.600 --> 0:15:16.850 the supply chain issues that we are facing right now 0:15:16.850 --> 0:15:21.060 that is raising prices at the manufacturer level because they 0:15:21.060 --> 0:15:24.160 just can't produce goods as fast as they could. So 0:15:24.160 --> 0:15:26.920 it's the scarcity of goods raises prices. 0:15:27.100 --> 0:15:30.940 Third, what we have seen. The conflict in Russia and 0:15:30.940 --> 0:15:36.730 Ukraine has also reduced both food and grain coming into 0:15:36.730 --> 0:15:40.300 various parts of the world and also oil prices shooting 0:15:40.300 --> 0:15:43.920 up and oil prices going up is a necessary input 0:15:43.930 --> 0:15:45.240 for production of every, 0:15:45.285 --> 0:15:48.305 so that is also raising prices. So we have seen 0:15:48.305 --> 0:15:53.425 three or four things that are causing this inflationary pressure 0:15:53.425 --> 0:15:56.125 around the world and they are not going down despite 0:15:56.125 --> 0:16:00.625 the fact that monetary authorities in the US in Singapore 0:16:00.635 --> 0:16:03.405 everywhere else are raising interest rates. 0:16:03.720 --> 0:16:07.739 So we will see consumption go down, investments go down, 0:16:07.750 --> 0:16:11.900 infrastructure go down, slow down of all those will reduce inflation. 0:16:11.910 --> 0:16:15.810 The conflict in Russia eventually will go away. China will 0:16:15.810 --> 0:16:19.430 open up, so supplies constraints will also kind of go away. 0:16:19.440 --> 0:16:22.550 Hence inflation may be there until next year. But I 0:16:22.550 --> 0:16:25.120 just don't see that to be there much longer, 0:16:25.130 --> 0:16:29.770 if not much longer. How much longer when this thing 0:16:29.770 --> 0:16:31.160 is going to get better 0:16:31.290 --> 0:16:34.330 because we were hoping that Covid was going to go 0:16:34.330 --> 0:16:36.790 away this year and that we're going to go back 0:16:36.800 --> 0:16:40.200 to how things were then were slapped in the face 0:16:40.200 --> 0:16:45.080 by inflation, high property prices and all these things. When 0:16:45.080 --> 0:16:46.640 will things get better? 0:16:46.650 --> 0:16:51.580 We already at the end of 2022 governments, central banks 0:16:51.590 --> 0:16:54.640 around the world are working very hard. We just saw 0:16:54.640 --> 0:16:58.050 the Federal Reserve raised the interest rate by 75 basis point. 0:16:58.500 --> 0:17:01.240 And you are seeing the effect of that in terms 0:17:01.240 --> 0:17:06.680 of housing starts are a new development, construction or actually, 0:17:06.680 --> 0:17:11.199 new purchases of forms are dropping consumption levels where the 0:17:11.200 --> 0:17:13.540 data is available, at least for the U. S. You 0:17:13.540 --> 0:17:17.090 see consumption going down to answer your question more directly. 0:17:17.100 --> 0:17:18.840 I think we will be high 0:17:18.859 --> 0:17:22.550 having this issue all the way till 3rd, 4th quarter 0:17:22.550 --> 0:17:26.020 of 2023. So all of next year we are going 0:17:26.020 --> 0:17:30.090 to have inflationary pressure or prices go up, and as 0:17:30.090 --> 0:17:34.730 a result, interest rates go up and hopefully we will 0:17:34.740 --> 0:17:38.600 start seeing inflation to be dropped by the end of 0:17:38.600 --> 0:17:41.629 next year. So that's my prediction. So I'm taking a 0:17:41.630 --> 0:17:44.139 strong stand, and when I see this happening. 0:17:44.359 --> 0:17:46.960 Is this also going to be a case of when 0:17:46.960 --> 0:17:51.530 businesses raise prices coupled with the G S T increase? 0:17:51.530 --> 0:17:54.280 We're not going to see that go back down because, 0:17:54.290 --> 0:17:58.709 for example, tax affairs, they've increased tax affairs because of 0:17:58.710 --> 0:18:01.430 high oil prices. But I don't remember tax affairs going 0:18:01.430 --> 0:18:03.560 down when oil prices are down. 0:18:03.570 --> 0:18:06.280 That's true. So there's a lot of research that talks 0:18:06.280 --> 0:18:10.840 about how prices are sticky. When prices go up, they 0:18:10.850 --> 0:18:12.490 rarely rarely come down. 0:18:12.970 --> 0:18:17.500 But if you actually think about it, prices of electronic 0:18:17.500 --> 0:18:21.520 goods have only been coming down in the last 50 years. 0:18:22.080 --> 0:18:26.450 Your computer, your iPhone, you might say the iPhone price 0:18:26.450 --> 0:18:30.840 has been the same. Maybe 809 $100. But what is happening? 0:18:30.840 --> 0:18:34.170 The quality of iPhone every time is going up 1 0:18:34.170 --> 0:18:37.920 to 3 times the quality is improving. So essentially the 0:18:37.930 --> 0:18:40.710 price of iPhones have been going down. Your computers and 0:18:40.710 --> 0:18:42.270 everything else is going down. 0:18:42.760 --> 0:18:47.560 But taxi fares may be difficult because most of these 0:18:47.570 --> 0:18:50.960 kind of goods they adjust their prices every now and then. 0:18:50.970 --> 0:18:54.129 So imagine inflation has been there in the world. Every 0:18:54.130 --> 0:18:58.490 year we have inflation of 2%. Okay, which is reasonable. 0:18:58.490 --> 0:19:00.270 We want to live in a country where we have 0:19:00.270 --> 0:19:03.060 inflation because we don't want to live in countries where 0:19:03.060 --> 0:19:04.140 there's no inflation. 0:19:04.400 --> 0:19:07.210 But you don't see the price of chicken rice going 0:19:07.210 --> 0:19:11.000 up by 2% every year. What do the stars do? 0:19:11.010 --> 0:19:14.160 They keep the price constant, even though they know that 0:19:14.160 --> 0:19:17.250 inflation is higher by 2%. But every now and then, 0:19:17.250 --> 0:19:20.050 maybe five years, 10 years down the raid, they increase 0:19:20.050 --> 0:19:21.140 the price of chick 0:19:21.170 --> 0:19:26.490 and rise by maybe 30%. That adjusts for the inflation 0:19:26.490 --> 0:19:28.850 for the last 5, 10 years, and that's what we 0:19:28.850 --> 0:19:32.430 are seeing that is happening. This inflationary pressure is causing 0:19:32.430 --> 0:19:35.150 everybody to adjust. But now what we will not see 0:19:35.150 --> 0:19:37.930 is them adjusting prices for another 5 to 10 years. 0:19:38.470 --> 0:19:40.510 You are right. It may not come down, but it 0:19:40.510 --> 0:19:42.640 may not go up for the next 5 to 10 0:19:42.640 --> 0:19:43.609 years old. So 0:19:43.830 --> 0:19:45.460 I guess in the meantime, we have to get through 0:19:45.460 --> 0:19:48.330 the next year. It's 0:19:48.330 --> 0:19:51.570 one of those situations where there will be hard times 0:19:51.570 --> 0:19:55.150 to come, at least in the short run. But in 0:19:55.150 --> 0:19:58.200 the medium to long term, I don't think we should 0:19:58.210 --> 0:19:59.790 be that concern, 0:20:00.119 --> 0:20:04.630 especially for a country like Singapore, where the government is 0:20:04.640 --> 0:20:08.609 agile enough and they understand. And they can react fast 0:20:08.609 --> 0:20:09.030 enough 0:20:09.510 --> 0:20:12.709 in the US, where the policy making and politics is 0:20:12.710 --> 0:20:16.050 so convoluted that it will take years and there will 0:20:16.050 --> 0:20:19.710 be so many different fractions that nothing gets done. At 0:20:19.710 --> 0:20:24.000 least in Singapore, we will see reaction faster. And Singapore, luckily, 0:20:24.000 --> 0:20:29.000 also has a surplus. Unlike many other countries, they have deficits. 0:20:29.010 --> 0:20:31.540 So if they have to do any fiscal policy, they 0:20:31.540 --> 0:20:32.600 have to borrow. 0:20:32.800 --> 0:20:35.690 Singapore doesn't have to borrow. They can actually dipped in 0:20:35.690 --> 0:20:40.939 their surplus and reserves and actually help the consumers or households. 0:20:40.950 --> 0:20:44.770 Government is putting part of the revenue from this extra 0:20:44.770 --> 0:20:48.720 tax and putting that to the lower income households to 0:20:48.720 --> 0:20:54.070 help them cope with this rising G S t. But 0:20:54.080 --> 0:20:57.690 is that assurance package from the government 0:20:57.859 --> 0:21:02.140 enough to help the low income group in the long term? 0:21:02.150 --> 0:21:05.610 Or do you think that this will be a short 0:21:05.609 --> 0:21:09.280 term measure and after that, they'll have to figure out 0:21:09.280 --> 0:21:11.030 how to cope in the end? 0:21:11.040 --> 0:21:14.600 So I can't imagine this to be a permanent measure. 0:21:14.609 --> 0:21:19.000 Part of the measure is to help them because of inflation. 0:21:19.580 --> 0:21:23.380 Part of the measure is also to help them smooth 0:21:23.380 --> 0:21:27.750 their spending habits in steps as opposed to taking a 0:21:27.750 --> 0:21:32.580 big shock in reducing consumption. By allowing them to get 0:21:32.580 --> 0:21:35.340 some of the money back that they would have spent 0:21:35.350 --> 0:21:39.950 extra on GST payments. It gives them some breathing room 0:21:39.960 --> 0:21:43.140 to slowly bring down their consumption level. I think that's 0:21:43.140 --> 0:21:44.000 the right thing, 0:21:44.170 --> 0:21:46.679 but you don't want to make it permanent because essentially 0:21:46.680 --> 0:21:51.080 then you have not done any modification in consumer behaviour, 0:21:51.080 --> 0:21:53.840 a change in consumer behaviour on their spending because they 0:21:53.850 --> 0:21:56.830 realised there was no increase in GST. They just continue 0:21:56.830 --> 0:21:59.150 to spend the way they were. So you want to 0:21:59.160 --> 0:22:02.590 have an effect but the middle class or the upper 0:22:02.590 --> 0:22:07.270 middle class, where these rebates will be tiny or nonexistent? 0:22:07.280 --> 0:22:11.680 Those people will have to curb consumption or will have 0:22:11.680 --> 0:22:14.020 to think of other ways to smooth consumption 0:22:14.410 --> 0:22:16.850 before we let you go. Do you have any tips 0:22:16.850 --> 0:22:20.020 for us to manage this upcoming GSC hike? 0:22:20.030 --> 0:22:24.780 Yes, very simple tips make a budget figure out. What's 0:22:24.780 --> 0:22:29.240 your income? What's your expenses? How can you break down 0:22:29.240 --> 0:22:34.300 your expenses into necessary discretionary non discretionary expenses. 0:22:34.720 --> 0:22:38.650 Try to spread out the pain everywhere. So you can 0:22:38.650 --> 0:22:41.190 say I'm not going to just say we're not gonna 0:22:41.190 --> 0:22:44.139 take vacations. But we're going to continue eating out. So 0:22:44.140 --> 0:22:47.340 you want to cut down on all the things wherever 0:22:47.340 --> 0:22:50.650 you can because you are going to be experiencing this 0:22:50.650 --> 0:22:53.510 pain for another year or so. So it's not going 0:22:53.510 --> 0:22:55.970 to go away in the next two months. Three months, 0:22:55.980 --> 0:22:59.810