SEARCH

Right policy mix can help address Malaysians’ cost of living woes: World Bank economist

18 Dec 2019 / 22:46 H.

PETALING JAYA: The term “cost of living” is one that has different meanings for different households, which could lead to a misconception that it is rising, despite consumer price inflation being recorded at just 1.1% in October 2019, said World Bank Malaysia lead economist Richard Record (pix).

In an opinion letter, Record said closer analysis shows that despite low and stable inflation in recent years, different households live with different rates of inflation.

In addition, he noted that the consumer price index (CPI) does not include costs that have a high investment component, and that living costs vary quite dramatically across Malaysia.

“Beyond prices, we find that a key driver of this concern is the relatively slow wage growth, particularly the young and those who lack the necessary education and skills to thrive in today’s changing economy.

“Heavy household debt burdens and the need to put aside a significant share of income for vehicle loans, student loans or mortgage payments further squeezes income. And there is a shortage of housing that is affordable to low- and middle-income households. With these factors combined, it’s no surprise that a large share of Malaysians feel that they are falling behind,” he said in his letter.

To that effect, Record said with the right combination of policies, it is possible to address the deep causes that make so many Malaysians concerned about the cost of living.

One would be the continued reevaluation of price controls to identify and resolve the underlying causes of undue price increases for selected commodities. Another would be easing the income shortfalls among low- and middle-income households which could entail deepening existing social safety nets.

“An important first step to improving financial well-being is to raise awareness regarding prudent personal and household financial management and provide lower-income households and young adults with access to tolls and advice on how to make sound financial decisions.

“In the longer term, such efforts would need to be complemented by measures to strengthen consumer protection and encourage more responsible behaviour by financial institutions.,” he added.

Meanwhile, on the issue of affordable housing, Record opined policies to address the shortage could be improved through a sharper focus on principal residences for low- and middle-income households, better affordability measurement and evidence-based housing supply data and analytics.

“Stronger coordination among various public and private stakeholders is also needed to ensure an adequate supply of affordable housing,” he said.

email blast