Rakyat feeling the brunt of higher expenditures, despite Minister claiming incomes rising

Introduction

You can’t eat GDP You can’t feed a family with GDP. You can’t live in a rising share market. You can’t give your kids a better life because your company’s C.E.O. was able to give himself a big raise.

When rubber-meets-road, it has been argued that a better way to measure whether the economy is working for the mass of Malaysians is not GDP but household income. To the average Malaysian, what matters most is how much money is going into their pockets and what they can buy with that money.

Minister in the Prime Minister’s Department, Abdul Rahman Dahlan quoting the Report of Household Income and Basic Amenities Survey 2016 released by the Statistics Department, claimed that the report showed rising household income, declining incidence of poverty and decreasing income inequality under the BN government.

However, this optimistic account would be highly misleading if we ignore the rise in consumption expenditure, the meager income growth of the Bottom40 (B40) households, the issue of affordable housing, and a proper understanding of the Gini Index.  

 

Summary

  1. Household consumption expenditure has grown at a similar pace with household income. From 2014 to 2016, median household income grew at 6.6% per annum, while median household consumption expenditure grew at 5.9% per annum; mean household income grew at 6.2% per annum, while mean household consumption expenditure grew at 6.0% per annum.
  2. The reported higher median household income means little for the B40 households, and means even lesser to lower income households (B40) living in highly urbanised states, where inflation tends to be higher.
  3. An acute problem faced by the M40 households is the issue of affordable housing, where house prices in Malaysia are constantly above the affordability standard. Furthermore, economists and analysts warned that household debt might continue to increase in the coming years.
  4. The decrease in Gini index from 0.401 (2014) to 0.399 (2016) is a welcomed development, but we still lag behind countries such as Thailand, Indonesia, Cambodia, and Laos. Yet, the Gini coefficient does not measure wealth inequality, nor access to quality education, health, social security, and protection measures.

To read more about how Malaysian households are impacted by expenditure rising out of tandem with income growth, click to download and the full Focus Paper below.

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