JUNE 25 ― The recent rapid rise of inflation in the country, causing immediate financial burdens to Malaysians, affecting our social, mental, and physical wellbeing, is extremely concerning. This issue is made worse by the recent announcement by the Minister of Domestic Trade and Consumer Affairs that public subsidies on basket of goods will be lifted effective July 1, 2022. This is, and should be treated as, a national crisis.
As Malaysia recovers socioeconomically from the pandemic, the rise of living costs compounds on the financial stresses that resulted from the extra expenses incurred in the last two years such as maintaining SOPs, loss of business opportunities, supply chain disruptions, just to name a few.
As of writing, the government has yet to announce any solid mechanism to tackle this national crisis while it continues to worsen. As the removal of subsidies on chickens, eggs and bottled cooking oil comes into effect on July 1, 2022, it is inevitable that the prices of these staples continue to soar, further exacerbating shrinkflation where food costs at eateries go up while portions are reduced. The extra RM100 handout announced by the PM may help for the coming week, but how will it help Keluarga Malaysia in the months to follow?
Taking into account the prime minister’s U-turn yesterday where it was announced that the chicken price would not be floated and a new ceiling price would be introduced instead, it has to be pointed out that the government is simply treating the symptoms, not the disease. The U-turn and the announcement of a new price ceiling for chickens is merely a band-aid and will not yield sustainable economic effects.
This national crisis has moved my party, Parti Aspirasi Sains Malaysia (SAINS), and I to urge Prime Minister Dato’ Sri Ismail Sabri Yaakob, and his undeservedly well-stocked cabinet, to consider the following short and long term approaches, to achieve a healthy inflation rate target gradually:
Control money supply
The latest data on Malaysia’s Money Supply (M1) as of April 2022 stood at over RM620 billion, a steep rise, from RM450 billion before the pandemic ― an increase of nearly 38 per cent in just over 2 years. The rapid increase in money supply (M1) is certainly a major contributing factor to the current inflation rate and it needs to be controlled desperately before the situation worsens.
If we look at the United States, the latest number on its money supply (M1) is approximately US$21 trillion, an exponential rise from its pre-pandemic supply which stood at around US$5 trillion in early 2020, with inflation shooting up to 8.6 per cent as of May 2022, the largest jump since December 1981. Thus, there is a pressing need for the government to be extra careful when it comes to sudden injections of cash into the economy that encourage short-term spendings such as the EPF withdrawals.
Reactive fiscal policies
An improved and reactive taxation system is needed to reduce inflationary pressures while bringing down public spendings to optimise the government budget as well as reducing additional unnecessary general demands to the economy. Megaprojects should be suspended for the time being to minimise the demand to the economy.
The recent increment on the allowance paid to the chairman of Felda Global Ventures is a slap in the face of struggling everyday Malaysians who are still suffering from the aftermath of ill-conceived pandemic policies. Instead, all exorbitant allowances and any further increments to political appointees in GLCs and GLICs as well as cabinet salaries should all be frozen until positive indicators are met.
Revision of monetary policies
As the economic activities recover from the pandemic, there needs to be a pro-active policy that ensures demand does not grow too fast than its capacity that causes “demand-pull” inflationary pressures as the industry responds to shortages by increasing prices overnight.
Another interest rate revision is overdue to make borrowing more expensive and saving more incentivised. This, in the short term, should lead to a more gradual and expected growth in the consumer spending and investment behaviour among Malaysians. In the medium term, this should help minimise exchange rate fluctuations that can lead to cheaper imports while reducing the demand of exports, motivating exporters to cut costs.
New wage policies
In the long term, we should look into better and equitable wage policies that ensure fairer wages to the working class and narrow the income and wealth gap in Malaysia. At the moment, the minimum wage in Malaysia is extremely low relative to their employers. The new wage policies should look into calibrating and adjusting the minimum wage to the inflation rate to reflect a more realistic picture.
A new welfare policy (GMI ― Guaranteed Monthly Income)
Instead of the periodical and insulting knee-jerk handouts that have now become all too common as a way for the government to pacify the disgruntled public caused by worsening economic woes, Malaysia should guarantee a monthly income of RM1,500 to every B60 household. This will not only alleviate the financial burden caused by inflation, but also address the socio-economic issues directly by spurring economic growth and social mobility in sub-urban and rural areas of the country, creating new opportunities for businesses to capture, and government to generate tax revenues. SAINS believes a Guaranteed Monthly Income (GMI) will ease financial strains on the working class in Malaysia while at the same time, overcome money politics. It is also a way to channel back the subsidies that had been taken away from these communities.
Nonetheless, members of SAINS also do not discount the possibility of mobilising in solidarity with our fellow Malaysians who continue to suffer from the government’s inaction, inefficiency and ineptitude.
Extraordinary times call for extraordinary measures.
* Kenneth Chai is the protem president of Parti Aspirasi Sains Malaysia (SAINS). SAINS is a political party that stands for evidence-based policies and believes in an anti-poverty nation driven by trickle-up economics. SAINS is working towards taking legal measures while it still awaits the decision on the appeal filed in February 2022 against RoS’s rejection of its application to register as a political party. More information on SAINS can be found at www.partisains.org.
** This is the personal opinion of the writer or organisation and does not necessarily represent the views of Malay Mail.