Petrol Price Hike: What's Next? Yet Another Price Hike?

Some say clearer roads and a 'better' quality of living, some say increased inflation, while others predict yet another price increase...

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What can we already expect to happen in the near future?


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What will the recent petrol price increase do to us?<br/><br/>

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1. A lower fiscal deficit and a stronger ringgit in hopes of more foreign investors

Malaysia’s ringgit climbed to a two-week high, reversing an earlier decline, after an official said the government will announce measures to strengthen its fiscal position. Sovereign bonds climbed.

"The fact the announcement was made just weeks before the annual budget shows that one of the objectives is to defend the ringgit," said Song Seng Wun of CIMB Research.

"They want to contain it from sliding further."

Malaysia raised fuel prices for the
first time since 2010, joining neighboring Indonesia in curbing
subsidies that have stretched government budgets and threatened
investor confidence.

Malaysia cuts fuel subsidies for the first time in more than two years as it tries to cut its budget deficit.

"It's a process of fiscal consolidation. The market will feel more confident if we can bring down our fiscal deficit," Najib says.

“The fuel price increase is quite substantial,” Rahul Bajoria, a Singapore-based economist at Barclays Plc, said by phone yesterday. “This move will be taken as positive, but there is more to go. It’s probably a sign that the administration is acknowledging that there are concerns around the fiscal position and they are starting to move in the right direction. They need to do more.”

2. Bigger BR1M handouts in 2014 to ease the burden of the rakyat, says Najib amidst criticism

"To reduce the burden on the low income and vulnerable groups, following the fuel subsidy ratianalisation, BR1M will be increased in the Budget 2014, of which the new quantum will be announced in the upcoming budget," Najib said.

Increase of BR1M handouts in 2014 to ease the burden of the rakyat, says Najib, but some beg to differ

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“It is just a one-off thing. How often can you do this? It cannot address the problem of price increase of goods which will affect the livelihood of people,” the DAP member of parliament argued.
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3. Still, lower-income and middle-income Malaysians to continue struggling to keep up with the cost of living

Lower-income and middle-income groups to continue struggling to keep up with the cost of living

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DAP has expressed concern over the 20-sen hike in RON95 and diesel prices, pointing out that the medium and lower-income groups will be the hardest hit, despite the government promise of cash payouts to the poor to tide them over.

The government will announce measures to ease the burden of the middle income group in the 2014 Budget. "We will also plan something for the middle-income earners as they complain that they are also feeling the pressure in terms of cost of living."

4. More young Malaysians to prioritise buying property instead of cars, says REHDA

Real Estate and Housing Developers’ Association’s (Rehda) immediate past president Datuk Ng Seing Liong says, "Buying a property, such as an affordable house, should be the main priority among youngsters and they should not wear out their salary in owning a car."

More young Malaysians to prioritise buying property instead of cars, says REHDA

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"Buying a property, such as an affordable house, should be the main priority among youngsters and they should not wear out their salary in owning a car," he told Bernama today.

5. Private sector to boom, while some government projects are to be kept under control

Prime Minister Datuk Seri Najib Tun Razak said the private sector is the engine that will drive the nation's future growth.

He said that corporate leaders had to continue to show leadership to ensure Malaysia's sustainable growth as the Government could not do it alone.

Some state building projects with high import content will be delayed to help address the narrowing current-account surplus, said Najib. The government has yet to decide which ones, though it won’t include a planned subway in Kuala Lumpur, he said.

6. Higher inflation rate, says RHB Reserach but Najib says it's under control

Bayan Baru MP Sim Tze Tzin said he expected that inflation would creep in over the coming months.

He said that the relationship between oil prices and inflation was prevalent in economies such as Malaysia. “The people rely heavily on subsidies, especially fuel subsidies."

Najib says, "Currently, inflation is still low. We expect that its effects will not be to the public's detriment. Perhaps the rise (in inflation) will not be that high."

Malaysia's move to raise pump prices for petrol and diesel will push the inflation rate further to 2.2% from the current 2%, RHB Research Institute said in a report today.

7. An increase in bus and taxi fares, and logistics too say leaders in Malaysia's transportation industry

An increase in bus and taxi fares, and logistics too says leaders in Malaysia's transportation industry

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Federal Territory and Selangor Taxi Operators’ Association president Datuk Aslah Abdullah said although cab drivers in urban areas such as Klang Valley and Kuala Lumpur might not feel the pinch, drivers of hired cars in the rural areas would be hit hard.

Malaysian Taxi, Limousine and Rental Car Operators and Drivers’ Association vice-president Mohd Shahril Abdul Aziz concurred, saying that the rise was “too high” and cost would be passed on to the public.

Pan Malaysian Bus Operators Association president Datuk Mohamad Ashfar Ali said the rise in diesel price would have serious impact on the industry.

“It will definitely have a multiplier effect. I suggest that the Government consider doubling up the subsidised diesel quota that we are currently getting,” he said.

8. Better traffic?

Petrol Price Increase: The After-Effects on Malaysians and the Economy: Better Traffic?

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"However, the Mass Rapid Transport (MRT) Lines 1, 2, and 3 will proceed as planned.

"The Southern Corridor High-Speed Rail project is still under negotiations," he said

We can consider carpooling more. Less traffic jam. More hope for singles. More chance for friendships. We can push our MPs for better public transportation. Maybe even learn from our Southern neighbours who may be kiasu on many things but you gotta hand it to their MRT and bus systems.

9. Sources say GST (Goods and Service Tax) for 2014, but Najib has yet to confirm this

Asked if the Fiscal Policy Committee discussed about the impending Goods and Services Tax (GST), Najib did not provide a direct answer.

Instead, his curt response was that the matter would be raised during Budget 2014.

The GST Bill was tabled in Parliament on December 2009 to replace the current sales tax and services tax.

"The government should take advantage of the current economic environment where there is growth, full employment and low benign inflation to introduce the GST. "There can never be a good time to implement hard reforms but we can't ask for a better economic environment," says RAM Holdings Bhd group chief economist Dr Yeah Kim Leng.

“It is a must, not an option. We are trying our very best to include it in this year’s budget,” says Ministry of Finance Secretary-General Mohd Irwan Serigar.
“Surely, our ultimate aim is to take care of the country and people. We will ensure everybody is well taken care of, and we will not burden anybody,” he assured.

When the GST was introduced in other countries, it came with a reduction incorporate and income taxes.

"But in Malaysia's case, it's different as the sales and services tax is in place. The concern now for Malaysia is whether traders will increase prices to their whims," he said.

GST operates on a negative concept - all goods and services are subject to GST unless specifically exempted. For sales tax, the same concept applies where all goods are taxable unless specifically exempted. It is anticipated that the number of exemptions under the present sales tax regime would be significantly reduced.

Among other moves being hinted at are the introduction of the goods and services tax (GST), and reforms in the electricity tariffs.

10. Another price hike soon? Jangan 'sekali lagi lah'.

Potentially, the government could raise the fuel prices again six to nine months down the road and twice for 2014.

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