Are You Affected By The Rising Cost Of Living?

It’s been almost a given for each year’s government budget announcement that the M40 ends up with the short end of the stick.

Malaysians who make up the country’s 40 per cent of middle income earners classified as M40 often find themselves unable to qualify for financial aid and incentives for the B40. At the same time, they do not have enough money to cope with the increasing living costs due to inflation with their current incomes. Meanwhile, they still have to pay up all the taxes that are imposed on them by the government.

Will the upcoming Budget 2023 have anything to help M40s weather the rising interest rates and high inflation ? Perhaps M40s don’t need direct cash aid but more in the form of tax breaks and some financial incentives like exemptions from certain stamp duties and service charges.

For those who are unfamiliar with the terms, the B40, M40, T20 stands for Bottom 40%, Middle 40% and Top 20% respectively. Similar to how we are divided into several income bands, these income classifications are used to categorise Malaysians by their household income. 

Is it still B40, M40 and T20 income groups?

The ongoing pandemic has been rough on many Malaysian households. Despite the best efforts of the government, businesses, and individuals, it was revealed that approximately 20% of households slipped out of the M40 group to the B40 group due to losses in monthly income in 2020 alone. 

The pandemic years may have caused the B40 group to expand into the B50 category. Last year, the government together with Bank Negara (BNM) and the Credit Counselling and Debt Management Agency (AKPK) had rolled out a Financial Management and Endurance Programme (Urus) aimed at helping those it categorised as B50.

The T20 group was not immune to the effects of the pandemic either, with up to 12.8% of families shifting to the M40 group. Due to shifts in income categories, overall income distribution also saw a decline to 15.9% for B40 and 36.9% for M40, with the T20 group owning 47.2% of the income.

What is causing the cost of living to rise?

The cost of living is not just related to the level of inflation. It refers to the amount of household spending, including financial obligations, such as house or vehicle loans, to maintain a certain standard of living. However, inflation of the Consumer Price Index (CPI), which indicates the increases in consumer prices, does help to identify changes in cost of living.

According to data released by Bank Negara, price movements in the CPI basket seem to indicate that there are several items that are putting pressure on prices. The most noteworthy price increase appears to be the essential food items that are frequently purchased by Malaysians, particularly staples such as fresh chicken and eggs. 

The rising prices of these pressure point items are due to both domestic and global factors. The pandemic has obstructed production and logistics, resulting in a supply shortage. Shortage of overseas goods meant that domestic production had to make up for ever increasing demand, culminating in rising prices. The price of food products in particular have experienced noticeable increases as insufficient imports of animal feed and bad weather begins to take its toll.

B40 group most pressured by rising cost of living

The Bank Negara report revealed that the net income for households has been gradually increasing over the past decade, albeit rather slowly. 

The average net income (after deducting expenditure) in 2019 sits at RM230 (B40), RM1,127 (M40) and RM4,081 (T20). Without a doubt, higher price levels will pose more problems for households. However, keep in mind that the severity of the issue will vary from one household to another.

The B40 group in particular will likely spend relatively more on food and necessities, percentage income wise, as compared to the other groups. The biggest takeaway from this is that price pressure that is being driven by food will disproportionately affect the lower income bands.

As such, lower income households within the B40 band are much more vulnerable to increasing cost of living pressures.

What assistance is available for those in the B40 or B50 income groups?

In order to help alleviate the issue, the government has implemented a number of financial aid initiatives to assist lower income households, as well as those struggling to cope financially.

• Bantuan Keluarga Malaysia (BKM)

The BKM offers direct cash assistance under Budget 2022 for targeted groups, especially for those under the B40 group. It also provides assistance to individuals, single parents & senior citizens.

Household Category	Income	Number of Children / Amount
		0	1-2	≥ 3
Household / Single Parent	RM2,500 and below	1,000	1,500	2,000
	RM2,501 – RM5,000	400	600	800
Single Senior Citizens / No Spouse	RM5,000 and below	600	N/A	N/A
Single	RM2,500 and below	350	N/A	N/A

BKM also offers additional cash assistance on top of the basic assistance amount based on household status and number of children.

Household Category	Income	Number of Children	Basic Assistance Amount	Assistance Amount after including Additional Amount
Single parent with children (Additional RM500)	RM2,500 and below	1-2	1,500	2,000
		≥3	2,000	2,500
	RM2,501- RM5,000	1-2	600	1,100
		≥3	800	1,300
Households of Senior Citizens (Additional RM300)	RM2,500 and below	1-2	1,500	1,800
		≥3	2,000	2,300
	RM2,501 – RM5,000	1-2	600	900
		≥3	800	1,100

*Note: The household recipient is eligible to receive only one of the additional amounts.

You can find out more information about the initiative here.

• ePemula Programme

The ePemula programme was created to lighten the load on youth expenses, encourage cashless spending among the youth, as well as increase the adoption of cashless transactions by brick and mortar businesses. Each recipient can claim an e-wallet credit of RM150, which will be available  from 11 April 2022 to 1 June 2022. This credit can be spent until 10 June 2022.

The RM150 ePemula credit can be used for any physical transactions at the 1.2 million network of merchants through your chosen e-wallet, except the following:

• Peer-to-peer transfers
• Cash-outs
• App-integrated payment of utility bills
• App-integrated payment of Government related fees/payments
• App-integrated payment of telco postpaid bills and prepaid service top-ups
• App-integrated games purchases
• App-integrated parking and/or toll fees payments
• App-integrated investment-related activities
• E-commerce or online transactions

To qualify for this programme, you must be a Malaysian citizen who has attained the age of 18 – 20 years old in 2022 or are full-time students enrolled in courses equivalent to diploma or SKM4 and above in public or private institutes of higher learning (IHLs) in Malaysia recognised by the relevant ministries

You can find more information on how to apply for the programme here.

• Early Schooling Assistance

Otherwise known as the Insentif Bantuan Awal Persekolahan (BAP), this scheme aims to relieve the financial burden of parents and guardians in preparation of 2022/2023 school year. Students eligible for the scheme will receive RM150 each as a one-off payment. Distribution of the payment began on 17 January 2022 for students in Year 1 to Form 5 of the 2022/2023 school year.

To qualify for the assistance, parents/guardians must have an annual income of RM3,000 or less and the students must be from the following schools:

• Sekolah Kerajaan dan Sekolah Bantuan Kerajaan
• Sekolah Agama dan Sekolah Swasta Persendirian
• Sekolah Bimbingan Jalinan Kasih
• Sekolah Integriti & Sekolah Henry Gurney

You can apply for this assistance here.

For the full list of assistance available extending into employment, health and education, refer to the Ministry of Finance site for upcoming initiatives.