Malaysia's Wage Growth Must Keep Pace with Cost of Living, Says BNM

Malaysia's robust economic expansion must be reflected in increased household incomes and better job opportunities to ensure its benefits reach all citizens, stated Datuk Fraziali Ismail, Assistant Governor of Bank Negara Malaysia (BNM). He noted that Malaysia currently boasts strong macroeconomic performance, with growth exceeding historical averages, supported by low inflation and unemployment, and a stable economic foundation.

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Malaysia has very good macroeconomic figures. Economic growth remains high, inflation is low, unemployment is low, and the economic fundamentals are also strong.

Ismail identified the primary challenge as ensuring that the fruits of this economic growth are genuinely felt by the populace through improved earnings and enhanced employment prospects, rather than merely achieving high growth figures. He acknowledged a disconnect between the nation's economic achievements and the perception among ordinary citizens, stating, "Malaysia has very good macroeconomic figures. Economic growth remains high, inflation is low, unemployment is low, and the economic fundamentals are also strong."

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However, we must acknowledge that there is still a gap between the country's economic performance and the perception of the people at the grassroots level.

He further elaborated that various government policies implemented over recent years have directly benefited millions of Malaysians. Initiatives such as the RM1,700 minimum wage, which impacts approximately 4.4 million workers, and the implementation of cost-of-living adjustments in government-linked companies (GLCs) and government-linked investment companies (GLICs) have boosted the incomes of tens of thousands. Additionally, public sector salary adjustments, the Rahmah Cash Contribution (STR), the Basic Rahmah Contribution Program (Sara), and various government subsidies have strengthened household finances, particularly for low and middle-income groups.

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Our challenge now is not just to achieve high economic growth, but to ensure that the benefits of growth are truly felt through increased income and better quality employment opportunities.

Despite these measures, Ismail conceded that post-pandemic cost of living pressures have indeed caused household income growth to lag behind the rising cost of living, contributing to the perception that the benefits of economic growth are not yet fully realized. Addressing long-term challenges, he highlighted the need to tackle structural issues hindering wage growth, including reliance on low-skilled foreign labor and a shortage of quality job creation.

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At least half of Malaysians directly benefit from these various initiatives, while many more benefit indirectly through various forms of assistance and subsidies provided by the government.