Higher CPI no cause for concern, say economists

PETALING JAYA: The latest increase in the consumer price index (CPI), which has hovered above pre-pandemic levels since February, is no cause for concern, economists say.

Geoffrey Williams of Malaysia University of Science and Technology said this has been driven by the increase in petrol prices and utility costs, which are not indicative of wider issues.

“Oil was very cheap last year, so now the oil and petrol costs are pushing prices up. There is also some push in utilities due to changes in subsidies. Otherwise, it is quite subdued.

“Core inflation is a better indication at the moment and that is only at 0.7% whereas non-oil inflation is at 1.7%, which is still below the normal 2% target,” he said.

Williams said there was nothing much the government could do currently besides potentially control petrol and utility prices.

He said it was more important for the government to focus on raising incomes, adding that the recent stimulus package was too small.

“The rise in poverty will not be due to inflation but due to unemployment and underemployment, which together affect 3.1 million people or 19.4% of the workforce, according to the latest Department of Statistics Malaysia (DOSM) figures.

“Therefore, there is a need for direct cash transfers of RM1,500 per household until December. This is something we have been advising all year,” he said.

Rajah Rasiah, a professor of economics at Universiti Malaya, said if the total lockdown persists, one can expect a further rise in prices by June 28.

He said the CPI increase was due to the continued rise in logistics’ cost which raised the prices of most essential goods, especially the basket of goods included in the index.

Rajah said serious efforts must be taken to approve more transporters to raise connectivity and coordination between buyers and supplies in order to reduce cost.

“The government must also encourage more suppliers to come forward with approvals, and the producers of vegetables, fish, poultry and meats have to be handled carefully to sustain smooth demand and supply coordination,” he said.

Recently, former prime minister Najib Razak questioned the rise of the CPI to 123.1 in April, which was higher than before the pandemic began.

“A modest rise in the cost of living can still be acceptable if wages and income increase or when the economy is good,” Najib said in a Facebook post.

“But if the cost of living is rising at a fast rate and has risen to even higher levels at a time when wages are already down, income is declining and the economy is still going down in the midst of a lockdown, how will this affect the people?”

“Does anyone in the Perikatan Nasional government care about this?” — Free Malaysia Today