Cost-of-living issues will dominate the upcoming Budget 2018 as the government gears up for the general election that is around the corner.
Economists were quoted as saying another key issue to be addressed in the budget would be affordable housing, which continues to be a major grouse among urban residents.
AllianceDBS Research chief economist Manokaran Mottain said there would be a push to raise disposable income to weather rising living costs.
However, this will be carried out without compromising the government’s fiscal prudence and consolidation efforts.
With the economy growing at 5.7%, led mainly by a boost in private consumption and external demand, Manokaran reckoned that the government would continue to implement policies that bolster domestic demand to sustain recovery in consumer sentiment.
Essentially, Manokaran said the Bantuan Rakyat 1Malaysia or BR1M would likely continue, with a higher allocation of RM1,300 per household for those in the RM3,900 and below salary bracket.
To help financially burdened fresh graduates, new initiatives could perhaps be brought to the bill such as a Graduate Employment Scheme and Transit Home programme via a rent-to-own scheme.
Other initiatives expected to continue would be the Perumahan Rakyat 1Malaysia and Perumahan Penjawat Awam 1Malaysia, with more aid for better end-financing measures.
But Manokaran believes that despite the recovery in the overall economy, the country was still facing risks from higher living costs from GST, inflation and the weaker ringgit that had capped consumer spending in the medium term.
While Bank Negara has projected inflation at between 3% and 4%, Manokaran has kept a forecast of 3.8% due to the elevated inflation rate in the first half.
Meanwhile, Maybank Investment Bank Bhd (Maybank IB) said the setting up of a single or central authority to oversee the affordable housing market could be brought to the bill.
“The objectives, among others, are to better coordinate public and private-sector affordable housing programmes and projects. This is to avoid over-building and better match supply and demand via improved information and database on eligibility, products, pricings, locations and financing,” Maybank IB said.
It noted that there could be measures to boost the growth and development of the digital economy, promoting it as a source of growth, investment, employment and income through incentives for foreign and domestic investment in the Digital Free Trade Zone (DFTZ).
“This includes raising GST exemption threshold for online purchases in the DFTZ from RM500 to RM1,200,” Maybank IB added.
AmBank Research economist Anthony Dass said in a report that the auto sector could get relief in the form of further tax exemptions for localisation and a reduction in excise duties and/or import duties.
“These savings could lift carmakers’ margins and stimulate demand due to lower car prices,” he said.
Dass said the government is unlikely to increase gaming taxes for casino and lottery operators.
He believes that Genting Malaysia scored some brownie points with the government by proposing to spend about RM10bil on the Genting Integrated Tourism Plan at Resorts World Genting, Malaysia.
AmBank Research does not foresee any tax hike on tobacco and its products in the coming budget. Further increases in excise duties will only encourage the illicit trade that would hurt the government’s tax receipts from the industry.
Source: The Star (06 October 2017)