The policy debate – inside and outside the Bank – has recently refocused on the possibility of some other changes in the way our economy functions. Less than 18 months ago, the Bank’s interest rate was just 3.5%, essentially because the MPC wanted to stimulate private sector domestic spending to offset the effects on aggregate demand of weak net trade, given adverse developments in the world economy. As global conditions recovered, and with a pick up in public sector spending, we were able gradually to withdraw much of that stimulus during 2004 in a series of steps which were widely anticipated and understood across the financial and real economy (Chart 2). With the slack in the economy being absorbed, attention shifted to gauging the degree of demand pressures and their implications for the inflation outlook. In particular, on the basis of some simple statistical relationships, a question has been posed about whether there has been some change in the extent to which demand pressures feed through into wages and prices. Most notably, as discussed in the Bank’s February Inflation Report, the steady falls in unemployment over recent years have not been accompanied by a rising rate of earnings growth (Chart 3). These issues obtained some prominence towards the end of last year when, despite apparently buoyant demand, inflation on the CPI measure fell to 1.1%.
Companies applying to list on the SGX will also send their draft prospectuses to the exchange for vetting to ensure that they meet SGX's disclosure requirements. When the capital-raising provisions in the Companies Act are transferred to the new SFA later this year, MAS will take over from RCB as statutory regulator for prospectus registration. We are now reviewing the prospectus registration regime with a view to enhancing market accountability, and raising the standards of prospectus disclosure. Under the proposed regime, MAS will register a prospectus not earlier than 14 days and not later than 28 days after an issuer has lodged the prospectus with MAS. This period will allow for both regulatory review by the MAS and SGX, and public scrutiny and comment. (Currently, there is no public scrutiny before a prospectus is registered.) The prospectus will be published on the Internet to give investors the opportunity to scrutinise the prospectus prior to its distribution, and raise any issues of concern. This model is similar to that which has been introduced in the Australian markets. There will be a more measured approach to prospectus review by the regulator. I was told that SGX currently vets an average of five drafts for every prospectus that gets published. This is clearly not desirable going forward. The review of prospectuses by the MAS and SGX will focus, respectively, on compliance with laws and SGX's listing requirements on prospectus disclosure.