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ALTHOUGH the current inflation rate in Malaysia is claimed to be “lower” than the world average and remains “under control”, it doesn’t actually reflect the reality faced by ordinary Malaysians, who continue to suffer from rising food and fuel price inflation.
The Statistics Department reported that the consumer price index (CPI) – which measures the rate of change in the cost of purchasing a constant basket of goods and services by households in a specified time period – increased to 2.3% year-on-year (y-o-y) from 123.1 in April 2021 to 125.9 in April 2022.
Officially, Malaysia’s CPI is lower than countries like India, the United States, the United Kingdom and Singapore – at 7.04%, 8.6%, 9.1% and 5.6%, respectively. However, the ongoing fuel subsidy, together with the other subsidies and price ceiling/control measures, would have contributed to ensuring that actual inflation in Malaysia is lower than it otherwise would be.
As producers have to bear the brunt of price increases from feed ingredients and labour shortages, this has translated into a double-digit percentage rise in the producer price index (PPI) at 11.0% in April.
PPI measures the prices of goods at the factory gate – finished products but minus transport/logistics and other post-production charges such as wholesale, distribution and marketing.
This by itself is an indicator that – even minus the logistics and transport costs – food inflation should realistically be much higher.
In substitution of the price ceiling adjustment/variation for chicken and eggs as well as the removal of subsidies for cooking oil in bottles of 2kg, 3kg and 5kg from tomorrow onwards, the government will provide additional Bantuan Keluarga Malaysia cash assistance to the B40. An additional RM630 million of cash assistance is to be diverted from the original RM729 million subsidy for chicken farmers, whereby an additional RM100 and RM50 will be set given for B40 households and singles, respectively. However, this wouldn’t be a sustainable solution to alleviate the cost-of-living concerns of the rakyat in the long run.
The question is how long would such a paltry cash allowance last for the B40, who spend a minimum of 25% of their disposable income on food and non-alcoholic beverages even before the Covid-19 pandemic?
According to the department’s Household Expenditure Survey Report 2019, the B40 allocated more from their income to spend on food and beverage items compared to the M40 at 18% and the T20 at 12.6%.
With the increasing food price inflation in recent months, the B40 could well have been spending more than 50% of their income on food items alone.
The middle to upper M40 are also a vulnerable income group since their spending patterns are comparable to the B40 in relation to food consumption. In short, inflation has also eroded their purchasing power since their wages haven’t kept up. They also tend to not have sufficient cash buffer or savings relative to their income unlike the T20 group. Since the middle and upper M40 lack access to cash assistance, will we see more Malaysians experience cash flow problems or otherwise tighten their belts (and thereby see a decline in living standards)?