Source: The Malaysian Insider

 

By Shannon Teoh

March 31, 2011

Santiago said inflation has far outstripped salary growth. — file pic

KUALA LUMPUR, March 31 — Malaysia’s sluggish increase in wages is threatening a consumer debt default crisis as the working and middle classes increase their borrowings to deal with surging inflation, Pakatan Rakyat (PR) lawmakers said today.

Citing a World Bank report from last year, Charles Santiago (DAP-Klang) said real wages have only increased at an average annual rate of 2.6 per cent over the past decade, failing to keep pace with overall economic growth of nearly five per cent.

“The middle and working classes have not benefitted from the country’s growth but in fact, are forced to absorb the increasing cost of living through debt,” he said.

He added that with Malaysia’s gross domestic product (GDP) growing by 7.2 per cent last year, it showed that only the rich were benefitting from the economic rebound after 2009’s recession.

Household debt in Malaysia has been at an all-time high, reaching nearly 80 per cent of the GDP at the end of last year.

Santiago said that with inflation, especially of essential items such as food and energy, expected to accelerate this year, widespread default would threaten the entire banking system as 55 per cent of all bank borrowings last year were to private consumers.

“This is a sure way to lead to a default crisis like in the United States, which caused the global financial crisis,” he said.

“The consumer price index was 2.9 per cent last month and is expected to rise further. Those already living in debt will need to borrow even more,” Kuala Selangor MP Dzulkefly Ahmad said.

The PAS central working committee member added that the government’s new scheme to help young workers earning under RM3,000 own their first home without a downpayment, would only increase the pressure on the loans market and the amount of debt owed by low earners.

The lawmakers said the World Bank report showed that three per cent of Malaysian workers earned less than RM700 per month, below the poverty level of RM720 and the National Economic Advisory Council had in 2008 stated that 40 per cent of households earned less than RM1,500 a month and that this segment experienced the slowest growth in income.

The MPs called for a high level government commission to look into the imbalance in income with a view to establish a living wage standard for Malaysian workers.