More to sustainability than action on climate change, says MAS chief

The concept of sustainability goes beyond climate change and runs through the gamut of policies that ensure economic stability, said the managing director of the Monetary Authority of Singapore.

Speaking at a virtual conference on Wednesday, Mr Ravi Menon said sustainable use of resources is key to reversing the negative impacts of climate change.

At the same time, policymakers should pay more attention to achieving sustainable economic growth and promoting a sustainable work environment for their people to avoid the kind of demand and supply imbalance that has sent inflation spiralling to highs not seen in decades.

"Everything we do as central banks and as regulators, and I would also say what governments should be doing, is to think about sustainability," he said at a fireside chat at the 2022 Symposium on Asian Banking and Finance, which is co-hosted by the Federal Reserve Bank of San Francisco and MAS.

Agreeing with Mr Menon, the other panellist, Ms Mary Daly, president of the San Francisco Fed, said inflation has surged through the past year as consumer demand, helped by government support measures worldwide, recovered from the Covid-19 downturn more strongly than the supply of goods and services.

She noted that too-high demand relative to supply capacity begets inflation, which erodes people's purchasing power and their prosperity, and in the long run curbs job creation as well.

The central bankers were speaking at a time when analysts worldwide believe there is a high probability the global economy is headed for a recession as central banks raise interest rates to curb economic growth.

Mr Menon said popular commentary will criticise central banks for slowing down the economy by tightening monetary policies, which raises borrowing costs.

"But if you are growing too fast, you have no choice," he said.

"You have to slow down so that you can have more macroeconomic sustainability over the medium term."

Inflation in Singapore has reached its highest level since 2008, while prices in the United States are rising at their fastest pace in about four decades.

The MAS chief said that while the supply shock has mainly emerged from Covid-19 lockdowns and geopolitical frictions, including the Russia-Ukraine war, the imbalance in labour markets has also played a key role.

Falling participation rates and the displacement of non-resident workers due to the pandemic explain most of the labour shortages worldwide, but the current labour supply shortage also reflects a deeper change in how people, especially the younger generation, view work, he said.

In Singapore, the ratio of job vacancies to unemployed persons in the second quarter reached its highest level since 1997, representing a tight labour market.

Both the central bankers agreed the pandemic has opened a broad discussion on the work environment and on how to strike a balance between the work and family commitments of employees.

They said more contact-intensive sectors of the economy are facing an acute labour shortage, which eventually contributes to boosting inflation.

More workers now prefer either to work from home or a hybrid work arrangement where they are working on site for only two or three days a week.

Mr Menon said employers and policymakers should pay more attention to promote sustainable work environments where their staff are more productive at work and still have time to spend with families and friends.

"We should treat people in their own right, rather than as a human resource or an input into the production process," he said.

"When people have time to rest, recharge and do other things, they do become more creative.

"When you're rushing every day, you're not innovative. You do need to take your mind off in order to be more creative, more vibrant, more innovative."