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Household income has risen faster than spending

SINGAPORE — Households across the Republic spent more last year than they did five years ago — but their incomes grew at a faster pace than expenditures.

Diners at Chinatown Food Street last month. Housing, food and transport continued to account for the largest shares of household expenditure, totalling 65 per cent. PHOTO: BLOOMBERG

Diners at Chinatown Food Street last month. Housing, food and transport continued to account for the largest shares of household expenditure, totalling 65 per cent. PHOTO: BLOOMBERG

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SINGAPORE — Households across the Republic spent more last year than they did five years ago — but their incomes grew at a faster pace than expenditures.

The average household here drew a monthly income of S$10,503 last year from sources including employment, business, dividends and contributions from friends and relatives. This marked an average annual increase of 5.3 per cent from 2008, when the average monthly household income was S$8,105.

In comparison, the average monthly household expenditure last year was S$4,720, an average annual increase of 4.4 per cent from 2008, when the figure was S$3,809.

These were among the findings of the Department of Statistics’ (SingStat) Household Expenditure Survey 2012/2013 released yesterday, which economists said were reflective of a tight labour market and the Government’s efforts to increase wages of low-income workers.

Conducted every five years, the latest survey is based on data collected in 2012 and last year for Singaporean and permanent resident households.

The numbers were given in nominal terms, but incomes and expenditure rose even after inflation was taken into account, said SingStat. Between 2008 and last year, the average annual change in inflation was 3.1 per cent.

The low- to middle-income households saw incomes rising faster than higher-income households. However, while the bottom one-fifth of households saw the biggest gains, their monthly income of S$2,022 on average still lagged behind expenditure, which averaged S$2,231.

SingStat said this was partly due to a higher proportion of retiree households among this group. It added that households may finance their expenditure through irregular receipts such as proceeds from sale of properties, lump-sum Central Provident Fund withdrawals, insurance claims or ad hoc transfers that are not part of regular income.

The disparity between spending and expenditure for the bottom one-fifth of households has, however, narrowed, which economist Randolph Tan welcomed. “I think the main concern has been the wide disparity between income and expenditure for the lowest quintile revealed (in) the previous survey in 2007/2008,” said Associate Professor Tan, a Nominated Member of Parliament and deputy director of SIM University’s Centre for Applied Research. “That has diminished significantly and although there is still a shortfall, I believe the improvements show the way forward.”

For this group of households, the value of government transfers and rebates or subsidies that offset expenditure amounted to 90 per cent of their annual household income before the transfers.

Among households in one- and two-room flats, incomes — which include regular government transfers such as Workfare and GST Vouchers — exceeded expenditures. Assoc Prof Tan felt allocating transfers by housing type has worked. “In that sense, focusing on housing type when allocating government transfers is still an appropriately-targeted approach.”

Other economists also said the survey findings show that policies to lift wages of low-income workers are working. This sets the tone for continuation of the policies ahead of next year’s Budget, said Barclays economist Leong Wai Ho.

The increase in expenditures last year was partly due to households consuming better-quality and higher-end products and services, said SingStat.

More people are dining out and while meals at hawker centres and food courts continued to make up the bulk of expenditure from dining out or takeaways, the share of spending in restaurants, cafes and pubs has increased.

Housing, food and transport continued to account for the largest shares of household expenditure, totalling 65 per cent. The remainder went to recreational and cultural activities, education, insurance payments and health services, among other things.

Housing and related expenditure registered the largest increase in dollar terms among all expenditure groups in the past five years, from S$1,169 in 2008 to S$1,734 last year. But when imputed rentals for owner-occupied accommodation were excluded, expenditure on actual rentals paid by renting households, utilities and furnishings increased from S$550 to S$690.

Households living in public flats spent a larger proportion of their total expenditure on food than those living in private property and households in one- and two-room flats spent proportionately more on healthcare than other households. The latter is because of the higher proportion of retiree households (nearly 20 per cent) in one- and two-room Housing and Development Board flats, said SingStat.

On the whole, the survey is reflective of underlying macroeconomic conditions such as a full-employment economy, said CIMB economist Song Seng Wun. “We’re seeing businesses pay more and the Government has moved to push wages up. This should help to support wage growth on both the nominal and real income levels,” he said. “It’s not the cheapest place on the planet to live, but wage growth allows households to cope with the cost of living.”

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