Although it is a global phenomenon, Malaysians' wallets took a really hard from inflation today. With wages remaining stagnant while the price of daily necessities already at sky high and the latest being petrol effective today, the current inflation trend is morphing a wealth deflation at an unprecedented pace.
I can see the validity of increasing the price of petrol to reflect closer to its market value and an attempt to unwind the already highly distorted economy but to the laymen they couldn't care more than protecting their worth of a dollar earned to exchange for something more but not less. A notion that is valid for the common people after all we all try to maximize our marginal utility, which is recognized as one of the pillar of economics.
Understandably the government does not have much apparatus to tinkle around as this is much of an imported inflation. The cash rebate is necessary but it is a flawed one from the very start. A maximum rebate of $625 only translates into $1.71 offset per day - by doing the math, this is not very much. In addition, there is the power hike as well and on top of that the already hiked prices of items such as rice, pork, flour, cooking oil and sugar. All of which are daily necessities.
It is not too much for the government to ask the people to change their spending habits and energy use but it doesn't really make sense when budgets are already tight in the first place. How much can one go further with all the cuts? Stop eating? Light the candles?
Another farce is the comparison of petrol prices with non-oil producing countries like Singapore and Thailand when it should actually be compared to oil-producing countries like Saudi Arabia and Venezuela. After all, Malaysia is a net exporter of oil and it got the benchmark wrong.
I have long recognized that Malaysia's economic development is haphazardly ad hoc, responding to problems and crisis when they arise by taking short term flawed and distorted solutions. Not to the discredit the government but its long term economic plan is also on the same basis. All but cheap sweets that will eventually cause economic diabetes.
It is time that Malaysia needs capable economic visionaries and managers to chart the nation's development by liberalizing the economy, remove flawed and outdated polices and embark on a comprehensive tax and social security reform. At the very least the government could provide a better cushion for the people to ride out the rough journey of an imported inflation.
When there is a good system in place with sound risk management polices and practice, we wouldn't have what we have today - to eat the fruits reaped from a poisoned tree.
I can see the validity of increasing the price of petrol to reflect closer to its market value and an attempt to unwind the already highly distorted economy but to the laymen they couldn't care more than protecting their worth of a dollar earned to exchange for something more but not less. A notion that is valid for the common people after all we all try to maximize our marginal utility, which is recognized as one of the pillar of economics.
Understandably the government does not have much apparatus to tinkle around as this is much of an imported inflation. The cash rebate is necessary but it is a flawed one from the very start. A maximum rebate of $625 only translates into $1.71 offset per day - by doing the math, this is not very much. In addition, there is the power hike as well and on top of that the already hiked prices of items such as rice, pork, flour, cooking oil and sugar. All of which are daily necessities.
It is not too much for the government to ask the people to change their spending habits and energy use but it doesn't really make sense when budgets are already tight in the first place. How much can one go further with all the cuts? Stop eating? Light the candles?
Another farce is the comparison of petrol prices with non-oil producing countries like Singapore and Thailand when it should actually be compared to oil-producing countries like Saudi Arabia and Venezuela. After all, Malaysia is a net exporter of oil and it got the benchmark wrong.
I have long recognized that Malaysia's economic development is haphazardly ad hoc, responding to problems and crisis when they arise by taking short term flawed and distorted solutions. Not to the discredit the government but its long term economic plan is also on the same basis. All but cheap sweets that will eventually cause economic diabetes.
It is time that Malaysia needs capable economic visionaries and managers to chart the nation's development by liberalizing the economy, remove flawed and outdated polices and embark on a comprehensive tax and social security reform. At the very least the government could provide a better cushion for the people to ride out the rough journey of an imported inflation.
When there is a good system in place with sound risk management polices and practice, we wouldn't have what we have today - to eat the fruits reaped from a poisoned tree.
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