Use purchasing power to help Singaporeans understand the value of their money

Since independence, we have been using gross domestic product (GDP) and GDP per capita income, which has risen from about US$500 in 1965 to about US$55,000 (S$75,300) in 2015, as an indication of our people's livelihoods.

The consumer price index is also used to explain about inflation, but this index is very academic and may not resonate well with the general public.

Other instruments, such as the Gini coefficient which measures income inequality, are used to inform the public about Singapore's socio-economic status.

Whichever instrument we use, there are bound to be gaps as different tools are deployed to help policymakers make accurate readings and devise effective policies.

I would like to recommend that the Government change the way it communicates with the masses.

A daily challenge Singaporeans face is counting the value of each dollar in our income.

How much can we buy now and in the future, from every dollar earned or saved?

The Government provides dollar-to-dollar comparison with some countries to illustrate how Singaporeans are benefiting.

It might better communicate how much a typical Singaporean can buy with each dollar he has. For example, a dollar could buy a cup of tea in a coffee shop two years ago. Today, it costs between $1.10 and $1.20.

It is estimated that for every dollar a low-to middle-income taxpayer contributes, he gets back between $2 and $6 in subsidies, whereas the high-income taxpayer gets back 20 cents.

But this illustration may be cold comfort and may not resonate with Singaporeans.

Perhaps, we can look at using purchasing power to measure the value of people's money instead, as it might better communicate how much a typical Singaporean can buy with each dollar he has.

For example, a dollar could buy a cup of tea in a coffee shop two years ago. Today, it costs between $1.10 and $1.20. A similar beverage, however, starts at $1.60 in a foodcourt.

A plate of chicken rice today costs between $4 and $4.50 in a foodcourt compared with $3.50 to $4.00 last year.

Tan Kar Quan

A version of this article appeared in the print edition of The Straits Times on September 03, 2018, with the headline 'Use purchasing power to help S'poreans understand the value of their money'. Print Edition | Subscribe