First posted on 18 Nov 2008
PM Lee said that our finances are sound. The Government will implement measures to stimulate the ecoomy.
The recent methods to stimulate the economy are:
a) Spend on infrastructure works (i.e. Singapore and China approach)
b) Give money to the people to spend (i.e the US stimulus package)
These methods are good. I wish to suggest a third method:
c) Allow each person to apply for a relief loan for the loss or reduction of earnings
Here is how the relief loan works:
1. The borrower can apply for a relief loan to replace the loss or reduction of earnings.
2. This loan will carry interest at 2.5% p.a.
3. The total borrowing can be subject to a cap of say $50,000
4. The loan can be repaid at any time, when the borrower has excess earnings.
5. It will be a first charge on the sale or your property or CPF savings
6. The CPF savings cannot be withdrawn for investments, while there is an outstanding relief loan
The relief loan will help the affected person to pay the mortgage and carry on the daily life with dignity. This facility will provide the assurance for the employed people to carry out their daily life without cutting back on their expenditure drastically, although they are expected to be more careful and frugal. They will follow SM Goh's advice to continue to spend and keep the economy moving.
If mortgages continue to be paid, the property values will be somewhat protected. The fall will be modest. The lower price will encourage other people to buy properties.
How does the Government manage the task of assessing and approving these relief loans? I suggest that they outsource it to the banks and the financial adviser firms, who will carry out the assessment to the expected standard in return for an agreed fee. They have many representatives who can be retrained to process these relief loans. It will create useful jobs for these representatives.
This concept is especially relevant to Singapore, as we do not have any unemployment benefit. A relief loan can be a good alternative to help the affected people.