The Singapore Central Bank chief warned that it is the end of the “cheap” era as Singapore must get used to higher prices as new cost structures emerge. In particular he emphasised on borrowing costs, labour costs and energy costs. Borrowing costs will not go back to the zero lower bounds we have seen in the last two decades, the costs of borrowing will be higher and more reflective of time horizons and risk premiums.
Labour costs will also have to increase in an effort to close the inequality gap for a more inclusive society. Lastly, costs of energy will go up as Singapore joins the global race to combat global warming. This will inevitably drive costs higher as we seek new alternatives to traditional energy sources.