On addressing household debt

Household debt is as high as 86.8% of our GDP, or gross domestic product. What this means is that for every ringgit Malaysia made as a whole in the last quarter, 87 sen is owed to a bank in one way or another.

This being said, will we be looking at a recession brought on by household debts?

What raises household debts? And why is it so high?

Well, it has to do with spending more on consumption as a nation. As Malaysians, we are literally consuming at a cost that we cannot afford with the cash in hand. And now, this pattern is about to bite us in the ass.

For too long, Malaysians have been too dependent on loans with a government that did not do too well in keeping its citizens out of debt, including credit cards, housing, education and, of course, car loans.

The examples of this too little too late “tak apa” culture can be seen in our current mega projects in mass transportation, including the MRT, LRT Extension and even the KTMB rail upgrades both northbound and southbound.

Instead of focusing on public transport,our government had kowtowed to the automotive sector by building roads and, to ensure they get a cut of the action, establishing highways. Even to this day, we still see the continuing establishment of highways instead of a moratorium to push for more public transport initiatives.

Subsequently, instead of focusing on properly affordable and liveable housing for everyone, there is instead a move to form low-cost housing far from public transport initiatives. How does this benefit the people? How does it keep costs of living low when you put a low-cost housing area in Selayang but do not provide access to the public transport grid?

And, permit me to say this, getting a second job as the AKPK chief mentioned at a credit card function during the World Cup was just bloody ironic. Is it not the main issue here that even with two breadwinners in a family, the cost of living is still so high?

And this is what BNM did by giving Rehda the middle finger. To Rehda, I love the fact that you are building more homes, but there is a limit to how high the price can go before everyone looks at you and say you're out of your God damned minds!

And same goes for the auto sector. The fact that our local auto sector is insisting that they be the first pick for government cars and even public transport is the reason why it is highly uncompetitive. Can you imagine what would happen if the Land Public Transport Commission allowed cars under Uber to become cabbies?

Let us face it, nobody wants to ride a Proton Wira, Saga, Iswara cab. They are outdated, badly maintained and are not even being produced anymore. That by itself is a clear signal to get these models off the streets as soon as possible.

And thirdly, there is education. Education is getting expensive not so much because of the fees, but because of rent-seeking. Ask any student in college what the highest cost is that they have to bear, and it will be housing, transport and technology in that particular order sans Starbucks and lepaking et cetera.

And the solution is highly dependent on the political will of this government. Household debt needs to be lowered by either increasing austerity initiatives, or stopping costs of living from getting higher and pushing them lower. Of course, the government will also need a source of income to do this, which is why capital gains taxes should be higher.

And, of course, there's a need for a progressive tax, which is the GST which is to be introduced next April.

These two will generate enough funds for the government to push forward with what it needs to do. But there needs to be two more prongs, and that is the move to address inequality on an economic scale. There is a need to check our corporations and see whether the wealth is equally distributed among employees and shareholders, but more so the former.

And there needs to be a mechanism to ensure that the wealthy do not benefit from austerity initiatives. This is the issue with continuing subsidies: these need to be rationalised and it will in the long term benefit the government through less money used for subsidies because it only targets certain groups instead of a wide net.

In the end, we need a government with the political will to look at the people's needs. Economic progress by leaving the majority behind will create oligarchs and plutocrats, and we know these will create the same issues that brought down countless civilisations in the past when it reaches critical mass.

History has shown what happens to nations where the poor can no longer afford anything while the rich eat cake, the likes of Occupy, the fall of the Berlin Wall, the crumbling of the Soviet federation and even the French Revolution. Thus, the government must seriously consider if it wants these histories repeated in our country.

Because like it or not, that is the direction we are heading right now. – September 23, 2014.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.