Budget likely to feature same goodies in bigger packages
BUDGET 2018 is the last budget before the next general election (GE). So, rest assured that it would be one that would be good for the man on the street as well as business.
There is not likely to be any drastic measures or taxes that would upset the equilibrium. On the same score, there is also not likely to be any new set of incentives or goodies that would be dished out because federal government finances are still tight.
The primary attention of most people would be on direct monetary assistance schemes such as the Bantuan Rakyat 1Malaysia (BR1M). Another is the personal income tax. In the last few budgets, BR1M payments have increased steadily, while personal income tax rates have not come down.
However, the government has allowed for higher relief for individuals and those with children and parents to support. This indirectly increases their disposable income.
But many do not really feel the impact from the higher tax relief because they still pay taxes, but only a lesser amount. It is not the talk among the people, unlike the BR1M.
The financial assistance from BR1M is more direct. The amount has gone up to RM1,200 for households earning less than RM3,000 per month. For households taking home a sum of between RM3,000 and RM4,000, the payout is RM900 per annum.
In the coming budget, one should not be surprised if the BR1M ceiling is increased to even RM1,500 or more per annum or more.
Can the government afford it? It certainly can if there are no more financial scandals that rock the confidence of international lenders towards the leaders.
The bill for BR1M has gone up over the years. In 2017, the total payout for BR1M is RM6.8bil, involving seven million people. Next year, it should be higher.
Going forward, the BR1M payout will form a substantial portion of government expenditure and it can be financed through several measures.
For one, the increased collection from the goods and services tax (GST) should be more than able to fulfil the additional payouts for the BR1M.
The GST is expected to net the government some RM40bil this year, and next year, it is expected to be about RM45bil. Apart from the increase in the GST, the government’s subsidy bill has also come down significantly due to the liberalisation of the energy policy.
The government used to subsidise retail petrol prices at the pump. Now, the subsidy bill has dropped to less than 15% of government expenditure and it will be lower in the years to come.
However, the reduced subsidy is not something that is popular with the people because the cost of living has gone up.
Consumers are griping about the steady rise in pump prices at retail petrol outlets. Electricity rates also used to be low because gas from Petroliam Nasional Bhd (Petronas) to power the generation plants used to be subsidised. Now, the subsidy has reduced and consumers are paying higher electricity bills.
The BR1M, on the other hand, puts money directly into the hands of the people. It is popular, especially among the folk in the semi-urban and rural areas, and is common chatter among the senior citizens.
It is one tool that the government can use effectively to convince voters.
Other goodies such as bonuses for civil servants are not as attractive as the BR1M. Also, the government cannot afford to give out a big bonus of, say, two months because it has 1.2 million civil servants under its belt.
And income from traditional sources such as dividends from Petronas are not likely to be very much more than this year for the government to afford a net set of goodies.
Dividends from Petronas used to form a big chunk of government revenue prior to 2014 when oil was averaging more than US$100 per barrel. Now, it is less than 15% of total federal government revenue, as international oil prices have dropped.
Last year, the federal government budget was based on oil at US$40 per barrel and this year it is US$45 per barrel. The outlook for oil is still weak and nobody dares predict with any certainty if oil would average more than US$60 next year.
Considering the circumstances, it leaves the government with limited sources of increasing revenue.
There is speculation that the government may increase the GST net to cover those who purchase goods online from the likes of Zalora and Lazada. But the incremental reve- nue is expected to be small.
Also, Prime Minister Datuk Seri Najib Tun Razak has to keep to his promise of bringing down the federal government budget fiscal deficit, which now stands at 3%. Economists are forecasting that the budget deficit would be about 2.9% in 2018, meaning less spending.
If that happens, it would endear the country to international rating agencies that want to see Malaysia’s persistent federal government budget deficit coming down gradually.
Unless there is a spike in oil prices, the budget deficit will be hard to erase. It will take several more years before Malaysia can attain a balanced budget.
The options are limited for Najib to dish out a variety of goodies to the people. Budget 2018 would likely maintain the current set of goodies. The only difference is that the packages are likely to get bigger in view of the GE.