Higher average household income growth expected

PETALING JAYA: The average Malaysian household real income growth is expected to be higher this year consistent with a projected 5.5% growth in the country’s economy, economist Dr Yeah Kim Leng said.

But next year, there would be a marginal decline in line with an expected easing in economic growth next year.

Last year, rise in mean monthly household income was consistent with a 4.2% increase in economic growth.

Yeah said overall, household spending was rising faster than income increases, by one to two percentage points.

“Household consumption growth will increasingly be constrained by the pace of income or wage increases, and high house- hold debt,” he said.

On Putrajaya’s position as recording the highest consumer expenditure, Yeah said this was due to wage and income increases and easier access to financing.

“It is likely that the demographic profile of Putrajaya is skewed towards the upper middle to high income groups, given the strong correlation between income and consumption,” he said.

Yeah said including household savings rate according to income groups would be helpful in reports on household expenditures.

Former Bank Negara economist Lee Heng Guie said growth in real mean household income, which had been adjusted for inflation, was at 4.3% per annum in 2014 to 2016, reflecting the effect of price increases.

Consumer price pressures had built up after the implementation of the Goods and Services Tax, fuel subsidy rationalisation and other costs, he said.

“These have affected the real purchasing power of the bottom 40% of the population (B40) and middle 40% (M40) households, and the yearly cash handouts helped to lift their income,” said Lee.

While general improvements in external and domestic economic conditions bode well for household income, he said it was vital to keep prices of essential goods and services stable to ease costs of living for the B40 and M40 households.