Yesterday’s report showed annual inflation accelerating to 3.2% (log annual and monthly changes; 2000=100):
Y-o-Y Core inflation has climbed pass the 2.0% level, and the Pain Index is nearing 5.0%. If there’s any comfort to be gained, it’s from the monthly growth numbers, which were barely above last month’s.
What that means: this is really the base effect from last year, combined with the jump in prices from subsidy cuts earlier this year. There’s little evidence yet of second order pass-through into the general price level. The slope of all three indexes have flattened after the December hike in petrol prices (2000=100):
Still, this bears watching – core inflation is uncomfortably high, which makes BNM intervention the more likely. I’m somewhat amused that the biggest jump in prices outside of fuel and food is in restaurants and hotels. You might want to watch your vacation bills.
Technical Notes:
April 2011 Consumer Price Index Report from the Department of Statistics
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why the gov cut subsidies...are they noticed that price of energy will raise then???
ReplyDeletethis is not because demand pull inflation, but it is cost push inflation....so sad...
Subsidies cost money - which eventually comes out of Malaysian pockets or in a reduction of services that the government provides.
ReplyDeleteThe cost of subsidies this year will be about RM20 billion. Just to compare, that's more than is spent on the entire education system, nearly double that spent on defence and security, and five times more than the entire public health system. Which would you prefer they cut to maintain subsidies?
the 20 bil subsidies is not all going to rakyat directly.It goes to industries to either reduce final cost to rakyat or to maintain profitability and continue in business thereby providing employment etc.
ReplyDeleteThus if the companies are inefficient and/or enjoying huge profits,the actual impact of the subsidies to the rakyat is much smaller.
If these companies are decent folks who do not hide profits nor practise transfer pricing a portion of the subsidies comes back to govt in the form of taxes etc.
And if the subsidised companies employs only Msians and pay them decent wages,more of the subsidies pass through to the rakyat.
Thus,the issue is how much of the subsidies are actually funding the lifestyles of the rich n famous and/or poor Indo,Bangla families and their families in their homeland economy.
Looking at profits of the subsidised companies and the bloated mgmt. . .looking at MNCs enjoying cheap gas & electricity but hv tax free status/indulge in transfet pricing. .looking at the remittance of monies by foreign workers. . .I would hazard a guess that the trickle down of the 20 b is really a trickle.
Would you be able to pin down the numbers?
btw . .the country still is promoting the country as cheap with cheap gas n electricity to bring in FDI (to meet KPIs?)
I would think a lot of the subsidies that aren't eaten up by industry is actually funding the middle-class.
ReplyDeleteBased on household expenditure surveys, lower income households spend far less on transportation than do middle class households.
The actual bulk of the subsidies is for petrol (gas subsidy is swallowed by Petronas; electricity generation likewise by TNB - main cost to the government is foregone taxes).
the main beneficiaries are the fat cats industrialists including MNCs.Domestic consumption of electricity is only 30%.
ReplyDeleteAnd govt subsidise them to create jobs and tax on their profits.They employ foreigners n pay low wages,makes profits,optimise tax thru shelters and transfer pricing etc.They invest overseas n pressures govt to relax rules to make it easier to do that.
So,if this govt is sincere n smart. .no more subsidies to industry.Raise wages and no more subsidies all round.
Let the real competitive industries grow.
Branding rakyat as addicts is contemptible whereas the real beneficiaries are those in ur entourage n welcoming parties as you trot the globe.
My two cents