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Thursday, 10 July 2008

Guard against a second round of inflation: Tharman

By Goh Chin Lian

SINGAPORE must guard against a second round of inflation. The latter could come about if wages are pushed up just to keep pace with price increases.

Finance Minister Tharman Shanmugaratnam issued the warning on Wednesday, noting that Singapore prefers to fight inflation by having a strong Singapore dollar to ward off imported inflation.

The Government will also give help directly to those who most need it, instead of trying to bring inflation down for every one as a whole, he said to a gathering of 500 unionists.

Mr Tharman's call for restraint comes at a time when workers - especially those in manufacturing, transport and administrative jobs - see inflation eroding their wages, and could press for more pay.

Despite wages rising by close to 11 per cent in the first three months of this year, real wages in some sectors fell after accounting for inflation that has reached beyond 6 per cent, according to a recent Manpower Ministry report.

Inflation is forecast to slide later this year, but meanwhile imported food prices have risen 10 per cent compared to a year ago, and petroleum products are 64 per cent higher, noted Mr Tharman.

Still, upping wages to offset inflation was no cure as it would simply cause employers to pass the costs on to consumers as well as dent Singapore?s competitiveness, he said.

In a separate interview with The Straits Times, Manpower Minister Gan Kim Yong said: 'We have learnt from our experience in the 1970s and 80s.'

When wages rose in response to inflation, bosses upped prices, leading to a wage-price spiral then.

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