Taking the medicine, in 1985 and 2008:

'In '85, that was the first time we had a downturn in a very long time. We had been growing more than a decade since the oil shocks. And things were going well, and suddenly we had this downturn.

The focus of our measures then (in 1985) was very heavy on cost cutting, restoring competitiveness and taking the medicine, taking the pain. We reduced business costs, cut government charges considerably, reduced taxes, reduced CPF very drastically. We cut employers' CPF by 15 percentage points, nothing on employees' side...

We did contemplate it because we thought it would soften the pain. But...upon thinking it carefully, we decided to bite the bullet - do the important thing, which was to bring costs down, and we persuaded the workers that it was necessary... that it would work. And it did work.

I remember the National Day Rally that year, '85. Then-PM Lee gave a lecture. He had slides, charts, graphs, compared with Korea, Taiwan, Hong Kong... on how our costs had gone out of line. Long explanation of why we had to take the medicine. No goodies. Not one. People listened carefully. They understood this. And the medicine worked.

This time, the focus should also be on making sure we keep people in jobs, make sure they can look after their families through their own efforts, with help from the Government.

We've put a bit more sugar coating on the pill this time... we've got assistance for families, not just the low-income where the emphasis is, but the middle-income families who feel a certain squeeze because they feel they are often left out of Government schemes.'

On cutting GST:

'(Finance Minister) Tharman has explained that it's the wrong thing to do to cut the GST. The right thing to do is to keep it there, and use the revenues in a targeted way: Help the people who need help; help the businesses who need help. That's a more effective way to do it.

You cannot look at individual revenue items. You have to look at the overall package: Where is the government getting its money, and where is the Government spending the money? And the balance between the two.

Are we, on a net basis, putting assistance into the system, or are we, on a net basis, running a big surplus during a time when the economy cannot afford to run a surplus? That is the question.'

On a possible CPF cut:

'It's very hard to say over the medium term, because we don't know how things will unfold. But for the immediate term, that's not our preference.

We've just built it up to 34.5 per cent, I think we'll look at other measures first to reduce costs... We don't want to send too pessimistic a signal, then everybody takes fright and shrinks back - you may make things even gloomier.'

On getting out of the downturn:

'I think this time round, recovery doesn't depend so much on our immediate measures, as on the overall state of the US economy.

Experts think (the US recession) may last three quarters or one year, but won't last forever. And then after the recession, how quickly the global economy can get back onto steady and reasonably high growth.

Here, there is a problem. In previous times, the US economy and all economies go down in a recession, then it comes back. Usually, it's quite a straightforward process, and it's likely to come back on a certain path - 1 1/2 to two years, and you're okay again.

But this time, because of the imbalances built up over the past five to seven years, balance of payments, deficits, the surpluses in Asia, the budget deficits in America, the borrowing and excessive consumption by American consumers, to get back to growth, you cannot go back to where you were before, which is, Asians lend money to Americans, Americans borrow money to spend. You can't go back to that model.

So how do you get back to the model where the savings and consumption are in balance? The Americans are not consuming quite so extravagantly and profligately, but is somebody else picking the slack? Maybe China, India, a combination of countries, including Europe? That's quite difficult to say.

That is something that cannot happen overnight, it takes several years. Therefore, it could be one year of recession and then several years of slow growth globally.

So that means for us also, several years of slow growth for Singapore.