Tuesday, November 18, 2014

Debts a way of life, according to Khazanah report on income inequality

Published: 17 November 2014
A shopping mall in Kuala Lumpur. A Khazanah report shows that Malaysians, especially from the lower income group, are getting deeper into debt as they cannot handle the increase in the cost of living. - The Malaysian Insider pic, November 17, 2014.


A shopping mall in Kuala Lumpur. A Khazanah report shows that Malaysians, especially from the lower income group, are getting deeper into debt as they cannot handle the increase in the cost of living. - The Malaysian Insider pic, November 17, 2014.















The limited savings of most Malaysian households show a worrying pattern of debt as people spend on consumer goods despite low incomes, a report on households and income inequality by the Khazanah Research Institute has found.
Households of all ethnicities had limited savings but were spending on items like televisions, refrigerators and cars.
The only way to pay for this was by taking on expensive debts, said the institute's managing director Datuk Charon Mokhzani at the launch of the report, called The State of Households, today.
The book, which is the institute's inaugural publication, was launched by its chairman and former minister Tan Sri Nor Mohamed Yakcop.
Drawing on data from investment fund Amanah Saham Bumiputera (ASB) last year, the report notes that the bottom 71.4% of account holders have only an average of RM554 in the fund.
Income and wealth disparity was also obvious in figures from the Employees Provident Fund (EPF) which showed low savings for the bottom 44% or nearly three million members.
While some 5,000 of the richest EPF members have about RM1.5 million on average in EPF savings, 13.5% of EPF members have an average of only RM3,580.
Low earnings and limited savings were causing households to spend on consumer goods using loans or credit.
In looking at household incomes, the report noted that growth in income levels has occurred, even for the bottom 40% of households whose incomes have grown the fastest, compared with the middle 40% and the top 20%.
But still, the majority of households at 74% earned less than RM6,000 per month, the report said.
Those earning less than RM4,000 a month were 55% and those earning less than RM2,000 monthly were 23%.
In contrast, the top 9-10% of households earned more than RM10,000 a month and are better positioned to withstand the impact of increased living costs.
Lower income households inevitably spend a greater proportion of earnings on necessities and will be more affected by rise in prices, Charon also said.
The report also showed how out of reach home ownership was for many Malaysians as houses here cost more than five times the annual median income.
The report is meant to be for use in national policy making.
Besides dealing with households and household incomes, it also addresses the state of the Malaysian workforce, trade and investment policies, subsidies, housing, consumer credit and food prices.
The research shows that income inequality is no longer a problem between ethnic groups but is found within each ethnic group, between rural and urban areas, and between genders. – November 17, 2014.
- See more at: http://www.themalaysianinsider.com/malaysia/article/debts-a-way-of-life-according-to-khazanah-report-on-income-inequality#sthash.yQss3CmJ.dpuf

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