KUCHING: The announcement of a significant salary hike for civil servants by Prime Minister Datuk Seri Anwar Ibrahim presents both immediate benefits and long-term considerations for the nation’s economy.
Economist Dr Dzul Hadzwan Husaini shared that the decision to announce the increase well in advance allows stakeholders time to prepare and anticipate potential consequences, particularly in monitoring price manipulation by producers.
“This foresight is crucial for maintaining market stability and preventing sudden price surges that could impact consumers and businesses alike.
“The immediate positive impact on the financial sector is notable, with higher disposable incomes, individuals are likely to allocate more funds towards investments, particularly in assets like property,” said Dzul.
He pointed out that the injection of capital can stimulate economic activity and bolster sectors such as real estate and construction, thereby contributing to overall economic growth.
“Additionally, the boost in purchasing power for civil servants can benefit small and medium enterprises (SMEs), leading to increased sales and expansion opportunities within the domestic market.
“Addressing income inequality and poverty is a fundamental aspect of socioeconomic development, and the salary hike aims to uplift lower-income segments of society.”
Speaking to New Sarawak Tribune on Thursday (May 2), the senior lecturer at the Faculty of Economics and Business, Universiti Malaysia Sarawak (Unimas), notes that by redistributing income through higher wages, the government seeks to narrow the wealth gap and reduce poverty rates.
He said that this redistribution can have ripple effects, fostering a more equitable society and promoting social cohesion.
“In considering the sustainability of salary increases, it’s important for the government to adopt a long-term approach, implementing regular, incremental adjustments to salaries rather than one-time lump sums can mitigate the impact on inflation and market sentiment.
“This gradual approach allows for more predictable adjustments that are easier for both employers and employees to absorb without causing significant disruptions to the economy.”
Dzul stressed that the need to reforming the tax system to enhance revenue generation is also essential, given the increased financial commitment resulting from higher salaries.
“Adjusting tax policies to ensure fairness and efficiency can provide the government with the necessary resources to fund public services and infrastructure projects without exacerbating fiscal deficits.
“A balanced tax system can promote economic efficiency and investment by removing distortions and loopholes.”
His remarks were prompted by Anwar’s announcement on May 1 that civil servants will enjoy a salary hike of more than 13 per cent starting December this year, the highest increase in the nation’s history.
Therefore, Dzul suggested that vigilant market monitoring is critical to prevent exploitation or manipulation that could lead to inflationary pressures.
‘By closely observing market dynamics and intervening when necessary, the government can safeguard against speculative activities and maintain price stability.
“This proactive approach helps instill confidence in the economy and ensures that the benefits of salary increases are not offset by undue inflationary risks.”
