KUALA LUMPUR (Oct 21): The Government's 1Malaysia People's Aid programme had increased private consumption by an average of 7.1% between 2012 and 2015 as lower-income households' higher disposable income allowed them to consume more.

The 1Malaysia People's Aid is also known as Bantuan Rakyat 1Malaysia (BR1M). The scheme is among measures to improve the livelihoods of the bottom 40% households (B40).

According to the Finance Ministry's 2016/2017 Economic Report, household disposable income is the "main determinant" of private consumption, accounting for an average of 67.4% of private consumption growth.

"The increase in earnings of the lower-income households will likely contribute to the growth in private consumption as they have a higher marginal propensity to consume," the ministry said.

Citing Bank Negara Malaysia data, the Finance Ministry revealed that households with an income of less than RM1,000 a month would on average spend 81 sen out of every RM1 of additional income.

The Finance Ministry said this was higher than the 18 sen for households with monthly income of more than RM10,000.

"BR1M cash transfers were intended to mitigate the impact of high cost of living on B40. The immediate impact of BR1M is reflected by an increase in household disposable income of the B40, which in turn translates into higher purchase of essential items such as food and housing.

"This can indirectly spur domestic economic activities through an increase in production of consumer goods," the ministry said.