Economic Report 2014/2015: Average monthly household spending growing faster than income

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MALAYSIA’s average monthly household expenditure grew at a faster rate than average monthly household income in the first six months of 2014, according to a preliminary report on the Department of Statistics Malaysia’s (DOSM) Housing Income and Expenditure Survey 2014.

The report is based on data collected from 42,000 households throughout the country in the first six months of the year. The survey will cover 83,456 households by the end of the year.

According to the report, the median monthly household income rose 8% yearly to RM4,258 in 2014 from RM3,626 in 2012 while the mean monthly income grew 8.4% to RM5,919 from RM5,000 in the same period.

Despite higher incomes, the rising cost of living remained a significant concern for Malaysians. The average monthly household expenditure increased 8.8% yearly to RM3,496 in 2014 from RM2,254 in 2009.

The main contributors to household expenditure were housing, water, electricity, gas and other fuel categories (22.8%), followed by food and non-alcoholic beverages (18.1%), transport (15.4%) and restaurants and hotels (12.3%).

The survey showed that urban and rural households in all the states benefited from the income growth with overall incidence of poverty decreasing to 1% in 2014 from 1.7% in 2012. All states except Sabah recorded a poverty incidence of below 2%.

Sabah, while Malaysia’s poorest state, nevertheless saw poverty incidence decline significantly to 6.4% this year from 8.1% in 2012.

The gross national income (GNI) index for urban and rural areas declined to 0.410 and 0.370 respectively in 2014 from 0.417 and 0.382 in 2012.

According to the Economic Report 2014/2015, the government expects DOSM’s final report to register a further increase in average monthly household expenditure, a trend over the last 15 years.

The economic report adds that the government will continue to address the issue in a holistic and integrated manner, through the implementation of the policies and programmes of the various ministries and agencies involved in reducing the burden of the people.

The government has been providing subsidies to reduce the cost of goods, such as rice and petroleum products, and services but has complained that the subsidies are straining its fiscal position.

In the past, initiatives that were introduced include the distribution of targeted cash assistance through 1Malaysia Cash Aid (BR1M) and the direct provision of goods and services via schemes like 1Malaysia People’s Shop and 1Malaysia Clinics.

The government also introduced a minimum wage policy and tighter control over prices set by businesses through the Price Control and Anti-Profiteering Act 2010 and Competition Act 2010.

In Budget 2014, it introduced the Private Affordable Ownership Housing Scheme (MyHome), which provides a subsidy of RM30,000 for the construction of affordable housing.

This article first appeared in The Edge Malaysia Weekly, on October 13 - 19, 2014.