(Bloomberg) -- With inflation and interest rates set to stay high, Singapore is prepared to increase support measures to help deal with the increased cost of living, Prime Minister Lee Hsien Loong said.

“The world is not likely to return anytime soon to the low inflation levels and interest rates that we have enjoyed in recent decades,” Lee said in a televised message Monday on the eve of the country’s National Day. “I know the cost of living is at the top of everyone’s minds.”

Rising living costs has always been a hot-button issue for the wealthy city-state that Lee’s political party has dominated since independence in 1965. Households are now feeling the pinch of rising costs driven largely by the war in Ukraine.

Singapore’s consumers are spending more relative to income, with an expenses-to-income ratio rising to 64% in May from 59% a year earlier, according to a DBS Bank analysis. 

Lee said the government has carried out multiple support packages, targeting assistance to those who need it most. More such measures will be “rolled out in the coming months,” he added. 

Singapore will need to make a “deeper response” by transforming industries and raising productivity to ensure that local wages will keep pace with inflation, Lee said. 

The country’s key core inflation gauge jumped in June to the highest level in almost 14 years as the economy flatlined in the second quarter, with rising prices weighing on activity.

Lee painted a grim picture of US-China ties in his speech, saying Singapore had to be “psychologically prepared” that in the next decades the region may not be as stable and peaceful as it has been.

His comments came just as China’s military announced a new exercise near Taiwan on Monday to keep the pressure on the island after US House Speaker Nancy Pelosi’s visit. 

“US-China relations are worsening, with intractable issues, deep suspicions, and limited engagement between them,” Lee said. “This is unlikely to improve anytime soon. Furthermore, miscalculations or mishaps can easily make things much worse.”

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