Malaysia subsidy cuts paused for tweaks???
The petrol subsidy at some point will happen. It is just a matter of time. Do you know the impact of the movement of RON95 to you.
The whole idea of the subsidy rationalization is to save the RM10B- RM12B, so it must come out from our pocket either way, just who is getting hit more or differently.
What will and what can you do with RM0.50/L?
These are likely impact to you and me
1. Direct Inflationary Impact
SME Bank’s analysis indicates every +RM0.10 per liter in RON95 adds ~0.27 percentage points (ppt) to CPI inflation.
So, a +RM0.50 rise = +1.35 ppt directly to inflation .
New inflation = 3.35%. That means prices overall go up 3.35% compared to last year on a minimum and this is just based on a baskets of goods. Average it goes up by 5% to 10% at retail level.
2. Overall impact could be from 5-10% across all expenses.
Many of us rely on cars to move around and RM0.50/L means RM50 extra per car in household.
Let’s keep in mind that Grab, Lala, deliveries vehicle mainly runs on RON95. This will result in all delivery charges and GRAB charges to rise be it ride, food delivery and/or goods delivery.
This also means per household, things will increase by 5%-10%. A household that spent RM1,000 on grocery will now need RM1,100
Workers will demand for higher salary and it will be factored into businesses and pass down to end consumer.
3. Comparisons with Diesel Subsidy Removal
Diesel subsidy removal (June 2024) raised retail prices by +0.1–0.3 ppt to headline inflation. That smaller effect was due to targeted support covering ~50% of diesel users .
4. Economic & Fiscal Effects
Subsidy savings: Removing RM0.50 (~half current subsidy RM1.16/l) across usage could yield RM10–12 billion/year, helping narrow fiscal deficit.
The math is simple.. any savings by the government must be paid by someone and a big portion of that is the RAKYAT…so we all must be prepared
GDP effects: Models suggest in the short term subsidy removal nudges inflation higher and production costs up. But in long term it reduces market distortions, boosts efficiency, adds to output and incomes .
Trade-off: Lower subsidies free up funds for debt relief – but it will likely dampen consumer spending temporarily.
That is why InTune Outsourcing created this financial mastery course to help to ease the transition and cope better with all the inflation pressure
Just look at hawker stall prices, Pre Covid and Now, in terms of how much is
1. Ice water
2. Milo Ais
3. Roti Canai
4. Economy Rice
5. Noodles
Added with the tariff increased subject to negotiation, cost of e invoicing implementation, adjustment to SST and after Diesel rationalization last year, how prepared are you?
Come join us to equip yourself with financial mastery at www.intune.my/financialfreedom
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