Malaysia's inflation surges to 7.7 percent in June after fuel price hike, hits 27-year high
The Associated Press, Published: July 24, 2008
KUALA LUMPUR, Malaysia: Malaysia's annual inflation rate spiraled to a 27-year high in June after a fuel price hike sent the cost of food and transport soaring, the government said.
Consumer prices in June rose 7.7 percent compared with the same month in 2007, more than double the 3.8 percent annual inflation rate recorded in May, according to data released late Wednesday by the Statistics Department.
Food and nonalcoholic beverages, which account for 31 percent of the price index, spiked 10 percent from a year ago. Transport expenditure surged 19.6 percent; alcoholic beverages and tobacco costs climbed 9.2 percent.
"The main reason for this increase is due to the substantial rise in the price of petrol and diesel announced by the government," the statistics department said.
The inflation figures underscore growing public frustrations over the higher cost of living after the government raised gasoline prices by 41 percent and diesel prices by 63 percent in early June to curb a runaway subsidy bill.
Domestic Trade and Consumer Affairs Minister Shahrir Samad said June's inflation rate was the highest since April 1981, when consumer prices rose 10.8 percent.
Shahrir said annual inflation would likely remain above 7 percent in July because the government raised electricity tariffs by 18 percent for households and an average of 26 percent for commercial and industry users.
Analysts said the sharper-than-expected surge in consumer prices and the regional trend of tightening interest rates add new pressure for Malaysia's central bank to raise rates at its monetary policy meeting Friday.
"The current scenario may have tilted Bank Negara's focus toward combating inflation,"
Kenanga Investment Bank said in a report.
It predicted Bank Negara Malaysia will raise its key overnight policy rate — used by banks to set lending rates — to 4 percent over the next six months. The rate has been unchanged at 3.5 percent since 2006.
Bank Negara Governor Zeti Akhtar Aziz was noncommittal Thursday, saying the central bank would have to consider factors such as whether inflation would increase and hurt economic growth in its rate decision.
"We're going to do what is in the best interest of the country," Zeti told reporters.
The government has said inflation may cross 5 percent in 2008, but it has pledged not to further raise fuel prices this year. Inflation was around 2 percent last year.
Malaysia's consumer price index is calculated based on retail prices of 460 items in nearly 25,000 outlets nationwide.
The Associated Press, Published: July 24, 2008
KUALA LUMPUR, Malaysia: Malaysia's annual inflation rate spiraled to a 27-year high in June after a fuel price hike sent the cost of food and transport soaring, the government said.
Consumer prices in June rose 7.7 percent compared with the same month in 2007, more than double the 3.8 percent annual inflation rate recorded in May, according to data released late Wednesday by the Statistics Department.
Food and nonalcoholic beverages, which account for 31 percent of the price index, spiked 10 percent from a year ago. Transport expenditure surged 19.6 percent; alcoholic beverages and tobacco costs climbed 9.2 percent.
"The main reason for this increase is due to the substantial rise in the price of petrol and diesel announced by the government," the statistics department said.
The inflation figures underscore growing public frustrations over the higher cost of living after the government raised gasoline prices by 41 percent and diesel prices by 63 percent in early June to curb a runaway subsidy bill.
Domestic Trade and Consumer Affairs Minister Shahrir Samad said June's inflation rate was the highest since April 1981, when consumer prices rose 10.8 percent.
Shahrir said annual inflation would likely remain above 7 percent in July because the government raised electricity tariffs by 18 percent for households and an average of 26 percent for commercial and industry users.
Analysts said the sharper-than-expected surge in consumer prices and the regional trend of tightening interest rates add new pressure for Malaysia's central bank to raise rates at its monetary policy meeting Friday.
"The current scenario may have tilted Bank Negara's focus toward combating inflation,"
Kenanga Investment Bank said in a report.
It predicted Bank Negara Malaysia will raise its key overnight policy rate — used by banks to set lending rates — to 4 percent over the next six months. The rate has been unchanged at 3.5 percent since 2006.
Bank Negara Governor Zeti Akhtar Aziz was noncommittal Thursday, saying the central bank would have to consider factors such as whether inflation would increase and hurt economic growth in its rate decision.
"We're going to do what is in the best interest of the country," Zeti told reporters.
The government has said inflation may cross 5 percent in 2008, but it has pledged not to further raise fuel prices this year. Inflation was around 2 percent last year.
Malaysia's consumer price index is calculated based on retail prices of 460 items in nearly 25,000 outlets nationwide.
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KUALA LUMPUR: Half of Malaysian households have a monthly income of less than RM3,000. This was revealed in the 2007 household income and facilities census by the Department of Statistics Malaysia. Of the 5.8 million households in the country, 8.6% have an income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000.
Answering a question in the Dewan Rakyat yesterday, Minister in the Prime Minister's Department Tan Sri Amirsham Abdul Aziz said 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. "Around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above," he said in reply to Dr Michael Jeyakumar Devaraj (Sungai Siput-PKR).
Amirsham brushed aside a suggestion by Jeyakumar in a supplementary question that the government only focused on the income disparity between racial groups instead of the overall income disparity in the society under the Ninth Malaysia Plan (9MP) review. "I have said this in the last parliament session: one of the focus areas for the government is to reduce the incidence of poverty among all racial groups as well as in the urban and rural areas. "The income gap between the urban and rural areas has been narrowed. We have the same target under the 9MP which is to further reduce the income gap between the rural and urban areas," he said.
In reply to another supplementary question from Dr Mohd Puad Zarkashi (Batu Pahat-BN), Amirsham said the policies and strategies under the 9MP were aimed at upgrading the economic status of Malaysians. "We also have strategies under the 9MP to provide opportunities to racial groups which have been sidelined so that their income levels will be increased as well," he added.
Answering a question in the Dewan Rakyat yesterday, Minister in the Prime Minister's Department Tan Sri Amirsham Abdul Aziz said 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. "Around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above," he said in reply to Dr Michael Jeyakumar Devaraj (Sungai Siput-PKR).
Amirsham brushed aside a suggestion by Jeyakumar in a supplementary question that the government only focused on the income disparity between racial groups instead of the overall income disparity in the society under the Ninth Malaysia Plan (9MP) review. "I have said this in the last parliament session: one of the focus areas for the government is to reduce the incidence of poverty among all racial groups as well as in the urban and rural areas. "The income gap between the urban and rural areas has been narrowed. We have the same target under the 9MP which is to further reduce the income gap between the rural and urban areas," he said.
In reply to another supplementary question from Dr Mohd Puad Zarkashi (Batu Pahat-BN), Amirsham said the policies and strategies under the 9MP were aimed at upgrading the economic status of Malaysians. "We also have strategies under the 9MP to provide opportunities to racial groups which have been sidelined so that their income levels will be increased as well," he added.
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Millionaire households
NST: The country's poverty rate will increase from 3.7 per cent to 24.3 per cent if the poverty line is raised from the current RM800 to RM1,500 per household.
Minister in the Prime Minister's Department Tan Sri Amirsham A. Aziz said the definition of the poverty line was a household income sufficient for basic necessities. It does not include luxury items. The basics are food, clothes and other expenses like rental, utilities, transport and communication, health, education and recreation.
On such an optimistic note, let's all have a look at the number of millionaire households globally. The definition of a millionaire household is homes with more than US$1m in net assets.
The absolute figures, number of millionaire households:
1) USA 4,585,000
2) Japan 830,000
3) UK 610,000
4) Germany 350,000
5) China 310,000
6) Italy 270,000
7) France 265,000
8) Taiwan 220,000
9) Switzerland 205,000
10) Brazil 190,000
11) Netherlands 145,000
12) Belgium 135,000
13) Australia 135,000
14) Spain 125,000
15) Canada 110,000
Naturally the absolute figures would be skewed favouring those with large population. Although, Australia, Belgium and Netherlands are notable exceptions.
A more revealing figure would be as a percentage of all households in that country:
1) UAE 6.1%
2) Switzerland 6.1%
3) Qatar 5.2%
4) Kuwait 4.8%
5) USA 4.1%
6) Singapore 3.8%
7) Taiwan 3.0%
8) Belgium 3.0%
9) Israel 2.7%
10) UK 2.4%
11) Ireland 2.4%
12) Bahrain 2.2%
13) HK 2.1%
14) Saudi Arabia 2.0%
15) Netherlands 2.0%
We can understand those OPEC nations with their millionaires. USA, UK and Singapore are up there mainly because of the strong property markets over the last 10 years (even taking into account the property correction in the US over the last year and a half). If there are more foreclosures and a further 25% correction in property prices in the US and UK, coupled with another 10% weakness in USD, well you can see USA and UK slipping quickly down the rankings.
Switzerland is there with its banking facilities, or rather the millionaires move there. Ireland is a real success story, from the pits the country have risen through smart investment incentives.
It will be pretty hard for the normal working public in Malaysia, Thailand, the Philippines or Indonesia to hold net assets of more than US$1m. The average salaries would put all these countries on a backfoot. We tend to subsidise a lot of necessities and in particular fuel and diesel. The subsidies and a deliberate weak currency policy are supposed to ensure competitiveness.
However, if these countries do not reinvest properly into education and high value-added industries, we will forever have to contend with sluggish salaries. In a way, that translates into the property values.
While I am loathe to put Singapore in a shining light, they have reinvested very well. In 5 years time, if you have finished paying off your HDB flats, you can retire as an easy RM millionaire in Malaysia. If you have an executive HDB flat and paid that off, well, you should be very very close to being a US$ millionaire - we are not even talking private property here.
These are government housing. For Malaysian graduates, work hard for the first few years then plan your career well. You may want to move to "internationally competitive" arenas, prove yourself and really earn good money, or get reposted back to Malaysia. You stay local, you will be paid local. Unless you try and establish your own business, which is no guarantee. Or pick industries which pay industry competitive rates.
