Price controls do not reduce the cost of living, they distort supply (Pt 2)

Dear Editor,
The real solution is not to cap prices ex post; it is to lower unit costs ex ante by expanding productive capacity, improving logistics reliability, and removing large household expenditure burdens through targeted social policy. Put differently: equilibrium prices are achieved when supply expands and productivity rises faster than demand—especially in a fast-growing economy facing capacity absorption constraints. In this regard, the relevant framework is structural, not administrative, and it rests on seven linked pillars:
5. Human capital (productivity and future earnings): The shift toward free tertiary education and the expansion of the GOAL scholarship program reduces a binding household constraint—tuition financing—while improving the future income-earning potential of the labour force. Over time, higher productivity supports real wage growth without importing inflation, and it improves the economy’s capacity to sustain social spending from a stronger non-oil tax base.
6. Health system modernization (household risk and labour participation): Expanding and modernizing regional hospitals reduces catastrophic out-of-pocket expenditure and the implicit “health risk premium” households must self-insure against. When health shocks are better pooled through public provision, disposable income volatility falls, labour participation improves, and the social safety net becomes more fiscally efficient than ad hoc cash responses.
7. Housing finance support (household balance sheets): Mortgage interest relief and concessional lending reduce the financing wedge between income and asset ownership, converting rent-like cash outflows into household equity accumulation. This matters macroeconomically: stronger household balance sheets support domestic savings mobilisation and improve the stability of the financial system—conditions that ultimately lower the risk premia embedded in prices and investment costs.
Lower unit costs, not administered shelf prices
Cost-of-living relief is ultimately a question of unit costs and productive capacity. When energy, transport, and climate risk are reduced—and when large household expenditures (education, health, housing) are structurally compressed—real incomes rise in a durable way. That is why the relevant metrics are productivity, logistics reliability, and fiscal space, not the optics of a temporary price cap.
Given the constraints of a letter to the editor, the foregoing is necessarily only scratching the surface. The intent here is to give readers a basic appreciation and a timely reminder of the policy architecture being deployed—not only to dampen the cost of living in the narrow sense, but to lower the recurring cost structure of a higher standard of living through productivity, capacity, and targeted fiscal shielding.
Price controls attempt to override market-clearing signals while leaving the cost structure intact; the predictable result is supply contraction, informal pricing, and weaker domestic production—precisely the opposite of what a fast-growing, import-exposed economy requires. Taken together, the existing fiscal shield (on the order of G$500 billion) and the seven structural pillars outlined above represent a coherent framework: protect households now while expanding the supply base that delivers lower equilibrium prices over time. This is not a debate about ideology; it is about whether policy strengthens national competitiveness or manufactures scarcity.

Sincerely,
Joel Bhagwandin