THE Government will use the Budget surplus to roll out more social spending and cash transfers amid the SG50 celebrations and expectations of an early election, said two economists.
But it will not be all goodies - with talk of more pressure on firms to raise productivity - although it will still be a "more carrots and less stick" approach, said OCBC economist Selena Ling yesterday.
Ms Ling and Credit Suisse analyst Michael Wan said the substantial surpluses accumulated since 2011 mean there is plenty of room in Monday's Budget to lay out new fiscal policies.
Credit Suisse estimates that a surplus of $10 billion has been built up since 2011, while OCBC puts the figure at over $12 billion.
"Even assuming the Government spends only half of its $10 billion savings accumulated, we estimate that special transfers will easily come in above last year's $12 billion," Mr Wan said. "Special transfers could rise closer to $17 billion if the Government spends all of its accumulated savings and calls an election before 2016."
Ms Ling said the Budget will be a "crowd-pleaser" as special transfers grew in volume over the years to over 3 per cent of gross domestic product last year. "The key themes run the gamut from improving the affordability of health care and housing, and addressing retirement adequacy, especially for the low- to middle-income households," she said.
A large part of the social spending in the Budget will be on the Silver Support Scheme, which aims to top up the incomes of Singaporeans aged 65 and older who have not accumulated enough savings in their working life.
The scheme will likely cost around the same amount as last year's $8 billion Pioneer Generation Package, said Mr Wan. While its form is unknown, the "substantial" spending on this new scheme will benefit around 10 per cent to 20 per cent of Singaporeans, Ms Ling added.
"On top of the Silver Support package, we could also see a cash transfer package of perhaps around $2 billion to $3 billion, similar to what we saw back in 2006 and 2011," said Mr Wan. The last two elections were held in 2011 and 2006.
The Government could also unveil some income tax rebates for the middle income and "sandwiched class", while reviewing the current income ceiling of $10,000 for Housing Board flats, and $12,000 for executive condominiums.
Ms Ling said she expects the "fiscal largesse" to materialise in the Central Provident Fund, and also service and conservancy charge rebates. She said: "The social security system is expected to be continually strengthened over time, and government transfers and subsidies will likely play an increasingly important role.
What could be additional icing on the cake would be if the Ordinary Wage ceiling or other CPF annual limits are increased, and if contribution rates for elderly employees are raised, to become closer to those in the below-50 bracket."
Business will get a look in too, with the Budget tipped to keep focusing on improving productivity and supporting companies through economic structuring.
It is unlikely to announce further labour curbs, Mr Wan said. "Since 2010, foreign labour growth has slowed down from 2011's 7 per cent year-on-year rise to 3 per cent as of June last year. We expect the Government to expand the current set of productivity initiatives, for instance, the Productivity and Innovation Credit Scheme and the Wage Credit Scheme, which is due to end this year.
"In addition, we will also likely see more details about the SkillsFuture initiative. We think that we will probably see more funding for direct programmes from this new initiative."
The Budget should feature fewer constraints and more incentives for economic restructuring as productivity has continued to lag and the process may require a rethink, Ms Ling said.