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How the Mini-Budget Helps
The second financial stimulus plan, or “mini-Budget”, was finally revealed in Parliament yesterday and stands, at RM60 billion, at about double the figure rumoured earlier.
The authorities admit, however, that the large allocation will not be enough to keep our economy as buoyant as it has been in the recent past: The recession is here, and its effects are at least as bad as expected, if not worse.
With export volume and commodity prices down, our main sources of trading income have been severely curtailed, and even with the mini-Budget our gross domestic product for 2009 is likely to contract to between -1 and 1 per cent — which is to say that our average prospects are for no growth.
Without the additional stimulus package, we would undoubtedly face a terrible depression — but even so, layoffs, reduced shifts and moratoria on overtime are inevitable.
Our net take-home cash will be on average a lot less this year and families will have to curtail their spending either by opting for similar but cheaper products, or by foregoing whole categories of luxuries altogether.
What Malaysians define as “luxuries”, however, varies widely across the socioeconomic board — and if the bulk of Malaysians were to stop spending, the resulting fall in domestic demand will be far worse than the external pressures of the global economic crisis.
At first blush, the mini-Budget may not seem to provide much in the way of direct comfort. It has a heavy concentration on infrastructural projects and fiscal expenditure, and relatively little on consumer relief, apart from a commitment to maintaining the huge RM27.9 billion allocation for subsidies.
We should remember that subsidies help to keep our purchasing power stable, and the mini-Budget should not therefore be interpreted as a sweetener in any way.
It is an emergency action plan and its focus is to provide a macro-economic solution to what might become a fullblown economic recession.
A key sector is unemployment, and the mini-Budget will provide 163,000 training and job placement opportunities for retrenched workers and unemployed graduates, as well as tax relief on retrenchment benefits that will at least help to take the edge off the trauma of losing one’s job.
The bulk of government expenditure for 2009 will, of course, remain focused on infrastructural development, capital guarantees for small and medium-sized businesses, and the new package provides for an additional RM5 billion for off budget infrastructural projects like the Low-Cost Carrier Terminal renovation at KLIA and the establishment of broadband community centres and basic telephone services in rural areas.
These measures are expected to have a “trickle-down” effect that will reach the average Malaysian consumer in the form of stable wages and employment — we get to keep our jobs and our pay — by keeping the entire economy stable without impinging too much on our competitiveness.
They will also keep us on the right footing to exploit any opportunities that may emerge from the global economic crisis. We must remember that global businesses will change dramatically in the coming months, but the nature of business itself will remain the same.
Naysayers will lament the absence of things like personal income tax cuts or additional direct subsidies, but it is knee jerk measures like these that will eventually hamper our recovery by transferring the burden of our debt to the government and to future generations of Malaysians.
We must undoubtedly make sacrifices in the coming months, but with the mini- Budget in place, these sacrifices will not hurt us as much they might have — and the pain, we hope, will not last as long.
