This article first appeared in The Edge Malaysia Weekly, on December 21 - 27, 2015.    

DID you know that the price of taugeh has gone up 30 sen per kilogramme? It was RM2.50 and in the blink of an eye, they are selling it for RM2.80,” says an Ipoh-based restaurateur.

It seems like a trivial complaint, but in a place where the bean sprout is part of its identity, the restaurateur assures that this is no laughing matter. But such talk is not exclusive to bean sprouts.

Most goods and services, including food items, transport, electricity and cinema tickets, are now common subjects of “then and now” price comparisons because more and more people are feeling the pinch.

According to the Department of Statistics’ latest data, the Consumer Price Index (CPI), which measures changes in the price level of a basket of goods purchased by households, rose 2.5% year on year in October to 114.1 points and averaged 2% in the first 10 months of the year (10M2015). Except for transport, all the items tracked were more expensive compared with a year ago.

The Food and Non-alcoholic Beverages (FNAB) Index grew 4.67% in October. It was the highest increment on a y-o-y basis for 45 months, contributing 58.2% to the increase in the CPI. In 10M2015, FNAB prices went up 3.5%.

In a Nov 23 note, MIDF Research says inflation is at a considerably higher level when the cost of fuel is excluded. “Inflation ex fuel, where we took out fuel from the CPI basket, continues its upward momentum of 3.96% in October, compared with 3.72% in September. This is a relatively huge difference compared with the headline inflation.”

Implicit in conversations over prices and official inflation data is the agony over Malaysia’s rising prices and cost of living that headline numbers struggle to convey.

Minister of Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hamzah Zainudin told reporters last week that Putrajaya is powerless when it comes to controlling prices of goods. “We have to understand that the costs of goods people want reduced are not controlled by the government. Supply and demand is up to the traders.”

That may be generally true but Hamzah’s statement also overlooks the role government policies have played in driving prices up this year. The most apparent of these are the 6% Goods and Services Tax, which came into force in April, and the subsidy rationalisation programme.

CPI data shows that the prices of goods and services have risen from February (109.9 points) to August (113.9 points) before tapering off as households started to adjust to the new consumption tax. The difference seems narrow because CPI growth has been capped by a significantly lower cost for transport. Retail prices for RON 97 and RON 95 petrol, which are now based on a managed float system, are considerably lower than a year ago, in line with the slump in global crude oil prices.

Yet, the 11,000 official complaints against errant businesses that took the opportunity to raise prices and a small rally outside the Customs Department in the weeks following GST implementation capture the general mood of discontent. Evidence of how the cost of living has risen post-GST can also be found in less volatile components of the CPI basket. For example, the cost of healthcare services and restaurant and hotel charges were up 4.7% in 10M2015 while the prices of miscellaneous goods and services rose 5.8%, all markedly above the average inflation rate of 2.5% during the period. Also striking is that prices for FNAB have not stopped rising since February even as the CPI moderated in August.

“Indeed the FNAB prices have been increasing at a rapid pace this year. I think it is well known that it was caused by both GST and imported inflation. However, it should be noted that the increase was partly due to businesses taking advantage of the situation,” says an economist.

“Besides that, the fact that the rising cost of living was affecting them could also lead to [them] raising their profit margins to cope with the situation.”

The shrinking purchasing power due to the weaker ringgit — having depreciated 24% against the US dollar this year — is also adding pressure to household expenditure. Imports ranging from essential food items like fruits and vegetables to big-ticket items like electronics and cars are increasingly hurting the pockets of households.

On top of that, there is the state’s rapid withdrawal of subsidies. This year, the authorities have given the go-ahead for a 10.3% increase in gas tariff, toll hikes for 12 highways in the Klang Valley and higher fares for KTM Komuter and LRT rides. They also scrapped the subsidy for the Super Tempatan 15% broken rice.

Next year will see more price increase — the government is removing the RM950 million cooking oil subsidy, power tariff rebates for households in Peninsular Malaysia will be cut by 33% and PLUS highway toll rates will be increased by 5%.

To cushion the impact of the rising cost of living on the poor, Prime Minister Datuk Seri Najib Razak started the Bantuan Rakyat 1Malaysia scheme. That the cash handout amount has doubled from RM500 for a qualified household when it was first implemented in 2012 to RM1,050 in 2016 for the poorest reveals the government’s subtle recognition that the cost of living is escalating.

Often when asked about the country’s economy, Najib, who is also the finance minister, defends his fiscal reforms on the basis that they have helped maintain Malaysia’s status as a solvent state when oil money is not flowing as freely. The “difficult” decisions to broaden the taxation base through the implementation of GST and trimming government spending through the removal of blanket subsidies are necessary for Malaysia’s long-term economic well-being, he says.

He wants Malaysia to have a balanced budget by 2020 and has been steadfast in that quest. In truth, his administration has made much headway, having reduced the fiscal deficit from 6.7% of the country’s gross domestic product in 2009 when he first took office to 3.5% in 2014. If all goes according to plan, 2015’s fiscal deficit will be even lower, at 3.2%. The target for 2016 is more modest — at 3.1% — given the slackening economic growth. For that, the government expects the people’s thanks and understanding.

That, though, is hard to come by. Take for example, the public reaction to the fare increase for KTM rides. Barely two weeks after the hike on Dec 2, the government was forced to declare that it had ordered KTM Bhd to give up to 50% discount to students, the disabled and senior citizens.

For the man on the street, Najib’s vigour for fiscal reforms and its limited attainment have garnered more contempt than respect. One reason for that is that growth in wages is not nearly as fast as the rise in the cost of living. According to a research by Khazanah Research Institute, half of Malaysian workers earned less than RM1,500 in 2013. The average wage was only slightly higher, at RM2,052.

The institute says that although the national median wage growth has generally outpaced inflation, it has not overtaken price growth in certain consumer items, especially main foodstuffs.

So, as the government intensifies efforts to achieve the fiscal targets, Malaysian workers and families will have to live with more acute increases in prices. There may be little the government can do to stem the tide of rising prices but there should also be little expectation of praise from the middle class, which is facing the income squeeze, and the poor, who are feeling the worst pinch.

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