PETALING JAYA, Malaysia - Low and middle-income households can expect some relief measures in Budget 2015 to help cope with the rising cost of living and the impending implementation of the Goods and Services Tax (GST).
"The Prime Minister is expected to announce mitigating measures to manage inflation following the latest reduction in fuel subsidies and next year's GST," said economist Lee Heng Guie.
Lee said he believed a higher 1Malaysia People's Aid (BR1M) payout would be among the short-term relief measures.
However, in the long term, he said both the Government and Bank Negara must coordinate demand and supply management measures to tackle rising inflationary pressure.
"This is to prevent inflation from spiralling out of control," the former research head of CIMB Investment Bank said in an interview.
Last week, the Government reduced the subsidy for RON95 petrol by 20 sen per litre in a bid to achieve its fiscal deficit target of 3 per cent by 2015.
Lee pointed out that inflation, which rose 3.2 per cent year-to-date, would remain on upward pressure with the latest fuel price increases as well as when GST is enforced in April next year.
"The Government remains committed to its fiscal reform path, which includes subsidy rationalisation and the implementation of the GST to broaden revenue base," he said.
Lee also said it was important for the Government to control and prioritise spending as well as reduce wasteful expenditure.
"I am hopeful that a broad-based fiscal reform, including fiscally responsible finance management, would help the Government achieve its target of a balanced budget by 2020," he said.
Fomca secretary-general Datuk Paul Selvaraj said that the public could accept the subsidy cuts and GST if their quality of life and services would improve in tandem.
Ordinary Malaysians were not convinced they would benefit, he said.
He said subsidies had been slashed before and the man in the street had to deal with a higher cost of living.
It was crucial for Malaysia to have an effective social safety net to help the most vulnerable members of the society, he added.
He said Fomca's wish list included affordable housing, food security and better healthcare.