Rafizi calls for 'collective effort' to battle inflation

Economy Minister Rafizi Ramli has called for a collective effort to battle inflation.

In his live address today to announce inflation figures for the month of November, he said consumers are partly to blame for the persisting increase in food prices.

“It has to be a collective effort,” said the Pandan MP today.

“Of course, the government will play its role to address the supply side but we also need to start looking at tackling the demand side,” he added.

Rafizi said if consumers refrain from buying or using unreasonably priced products, it will give an impression to business owners and suppliers that they should not arbitrarily increase the price of goods.

"Although the prices of food and non-alcoholic beverages continue to rise, people continue to buy and pay the higher prices charged by merchants.

"This to some extent contributes to the increase in the price of food and non-alcoholic beverages.

"Normally, if the price of chicken is too expensive, don't buy it," he said.

Inelasticity of demand

According to Rafizi, the data suggested that a prominent factor involved with rising prices was the inelasticity of demand.

Elasticity is an economic measure of how sensitive one economic factor is when corresponding to changes in another factor.

A product is deemed “inelastic” by economists when in spite of rising prices, consumers still purchase the same amount of goods.

With November's inflation elevated at four percent (compared to October), food and non-alcoholic beverages prices still displayed an upward trend, remaining above the seven percent range and driving up the consumer price index.

According to the data, food and drinks form most of the average household income expenditure - with it comprising up to 30 percent and over 11 percent used on eating out.

Rafizi suggested that one solution may be for more competition and pricing transparency to take place, with it being made possible through a public benchmark.

Target subsidies soon

Last week, Rafizi said as part of the government’s poverty eradication programme, it would be introducing targeted subsidies.

Today, he said the government will bring in a new mechanism for targeted subsidies soon, with it possibly being introduced by 2023.

"After three cabinet meetings, it is quite obvious that we have to expedite a proper rollout of an index-based targeted subsidy system," he said, adding that it will be “very soon” in a matter of months.

The Pandan MP said that introducing targeted subsidies was done out of economic necessity.

On Dec 15, Rafizi said that this was in line with the shared prosperity initiative encompassing three dimensions which are economic empowerment, environmental sustainability and social reengineering.

"I am also looking from a data standpoint to understand what is needed in terms of targeted subsidies and also our financial capability.

"In coming days, my main focus will be on plans for poverty eradication," the minister said then.

He indicated that Jan 23 was the deadline for these plans.

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