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

The lasting solution to inflation is to improve workers' productivity so they can command higher wages, he added.

Meanwhile, the Government will 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, notedMr 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.

Mr Tharman cited some figures yesterday to show how low- and middle-income families can more than offset inflation with government help.

In one example, a middle-aged couple earning $4,900 will spend $3,000 more, but get $3,600 in benefits and top-up to pay for two children's post-secondary education.

Mr Tharman was speaking at a dinner organised by the Singapore Industrial and Services Employees' Union, which had elected a new executive committee that afternoon.

He is the chairman of the union's council of advisors.

Deputy president Philip Lee, 51, said his union would not push for higher wages because economic prospects were uncertain. 'If jobs are not coming in, employers may retrench workers,' he said.

The government's latest forecast for the economy this year is growth of 4 to 6 per cent, down from 4.5 to 6.5 per cent earlier this year.

Some analysts expect the forecast to be pared down further as oil prices hit new highs and more developed economies join the United States in recession.

chinlian@sph.com.sg