On fuel subsidies, and earning/spending power

Rudd wants fuel subsidies in Asian countries to be removed. He thinks it artificially inflates prices across the region.

Malaysia recently had a 40% increase in fuel prices, where the old rate was RM1.92, and the new rate is RM2.70 (there is still a 30 sen subsidy).

Now, lets investigate the cost of living, and discuss earning power (therefore, spending power).

Australia has the concept of a Federal Minimum Wage (FMW), which currently stands at AUD$13.74 per hour. If you work a 40-hour work week, for 4 weeks (notice that this then gives you a 13 month pay cheque), that’s about AUD$2,200/month, and a yearly income of about AUD$28,579.20. Yes, even for flipping burgers at McDonalds, you get at least 2.2k/month!

Malaysia has no concept of minimum wages. With foreign labour available relatively cheaply, fresh graduates tend to earn RM1,800/month. Flipping burgers at Burger King? I hear (OK, I lie; I’ve seen this advertised outside a BK store) the salary rate is about RM560/month (that’s a measly RM3.50/hour).

OK, so the tax laws are different. Australia exempts you on your first $6,000/year. Malaysia has over 10 million workers, and only about 1.2 million pay taxes (you are tax exempt if your monthly salary is less than RM3,000). In fact, those in the highest 28% bracket currently stand at a paltry 38,500 people.

But the cost of living, is also different. A book, that costs USD$20, will cost about AUD$25-30 in Borders; the same book will cost RM85 in Malaysia! Its no wonder, Malaysians are said to not read very much.

So, books aren’t necessities. Lets look at milk. 1L in Australia would set you back AUD$2.03 (this being Pura Milk, which I’m fond of drinking). 1L in Malaysia (Dutch Lady) would set you back RM3.39. Ouch! Dollar-to-dollar, that is a $1.36 difference for an essential item.

Back to fuel… Its hovering at about AUD$1.60/L, and $1.70 is not far off. Think about paying RM2.70/L, with talk of it going up in the near future, also not far off. Then remember, the difference in wages. And take into account the cost of living.

Remember, in Asia, Malaysia isn’t deemed “bad”, or “third world”. In terms of development (South East Asia, at least), it stands next to Singapore.

Rudd, mate, if you’re not pushing for higher wages, don’t bother pushing for an end to petrol subsidies.

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  • http://andygoh.net/blog/ Andy

    I have heard it’s about RMB$5-6/L in China, the fuel price. That’s what I heard, not sure if its a fact.

  • http://www.bytebot.net/ byte

    @andy: software developers in China for example, are earning more than their counterparts in Malaysia. Cost of living has risen so much in China in the last few years (keep in mind I lived there for a period of time from 2004-2005)… Bubble? ;-)

    In Beijing, bicycles and public transport is still pretty rampant. Sure there are cars, but there are also the nouveau riche!

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  • http://www.6sigmaforum.blogspot.com I Talk

    Fuel price again. The only way to kick the joker out of the game is find out an alternative solution to replace fuel.

  • http://keithrozario.blogspot.com Keith Rozario

    The thing with fuel is that it affects the price of everything, simply because everything requires fuel.

    Conversely, the more you consume ANYTHING, the more you’re consuming fuel.

    There is nothing close to an alternative for fuel, remember crude oil not only moves your car, it’s used to build roads, plastics, transport and just about everything else. Try building a road with bio-diesel instead of Bitumen.

    Times are challenging and humanity (Malaysians included) that a change in lifestyle is neccessary no matter how much you hate Najib.

    My point is, don’t question the removal of subsidies, question where all the other money is being spent.

  • Lotso

    While I agree partially that the subsidy should be removed not because it will reduce the current world’s oil price but more towards making sure that people think twice ( or more) before they start the car just to head down the block to the local shop. Withlow fuel prices, people will not stop to consider to walk or ride a bike instead of taking the car.

    When its cheap, people will waste. When its not the they will think of their actions. Sad to say, perhaps this is the Asia mentality?

    Additionally, this places pressure for local govt to ramp up and build infrastructure for public transportation.

    On terms of cost and standard of living, I’ve always maintained that malaysia cost of living is high!

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