Economist explains high cost of living despite low inflation

Economist Yeah Kim Leng says the people will have to make lifestyle decisions in order to compensate for the high cost of living. (Bernama pic)

PETALING JAYA: An economist has sought to explain why the cost of living in the country is still high despite the “benign” inflation of 1% last year.

Speaking to FMT, Yeah Kim Leng, who lectures at Sunway University, said the inflation had not caused a contributing decline to the cost of living.

“If you take the example of fish, there are a number of variables that determine its price.

“Given that fuel is part of the cost of transportation, which will ultimately be lower, the scarcity of fish and the strength of the demand will ensure that prices remain stubbornly high,” he said.

He also cited prolonged depressed wages as a major factor in people’s inability to cope with the rising cost of living.

“Even the World Bank has affirmed this,” he said. “However, employers attribute the low wages to the low productivity of Malaysian workers.”

When asked what could be done to mitigate the rising costs, he said the people would have to make lifestyle choices.

For example, he said, if fish was expensive, consumers should switch to cheaper sources of protein such as chicken.

Yeah Kim Leng.

He also attributed the high prices of goods to the absence of many items from the basket of goods which measure the Consumer Price Index (CPI).

He said food inflation was at a worrying level as the majority of the B40 or Bottom 40 group spend a large part of their income on essential items.

“We have to emulate the developed economies in how they manage their agricultural practices, which has managed to keep food costs low.

“The main reason for this is their high level of productivity,” he said.

Asked what the Malaysian agricultural sector could do to enhance output, which would ultimately lead to lower prices for consumers, Yeah said focus must be placed on best practices and cost-efficient methods of production.

Adding that Malaysia had yet to achieve self-sufficiency in food production, he said the import of food items, which was subject to the vagaries of currency fluctuations, had also led to the spiralling cost of living.

“If the ringgit weakens, the food import bill increases,” he said.

Yeah said the institutional reforms undertaken by the Pakatan Harapan government, such as combating corruption and enhancing transparency, would help mitigate the cost of living.

However, he cautioned that these reforms would take time. - FMT