Cost of Living

Contributed to New Straits Times

Escalating cost of living negatively impact Rakyat in Malaysia especially the M40 & B40

1. What are the main factors driving the rising cost of living in Malaysia?

The rising cost of living in Malaysia is a multi-faceted one that is inter-related.  Among the main factors are summarised as follows :

(i)                Subsidy Rationalization

            The government has been gradually reducing subsidies (e.g. for fuel, electricity, and cooking oil) to better manage economy.  While the measures are necessary and beneficial in the long-term, such subsidy rationalisation raises costs for consumers.


(ii)              Housing Costs vs Wage Growth

            For many middle- and lower-income Malaysians, wage growth has been lagging behind inflation.  Compared to the average income growth, property prices and rentals have been escalating mush faster over the years especially in big cities like Klang Valley, Penang, and Johor Bahru.  

(iii)            Supply Chain and Logistic Challenges

            Bottlenecks and higher shipping/freight costs since the COVID-19 pandemic, compounded by geopolitical tensions (e.g. Red Sea disruptions, Russia-Ukraine war) have kept import costs high.


(iv)            Global Commodity Prices

            Increases in global oil prices, raw materials (eg. wheat, rice, steel) and shipping costs feed into higher costs for goods and services in Malaysia.  Malaysia is also a net importer of many food items.


(v)              Currency Depreciation

            The Malaysian Ringgit has weakened against major currencies especially the US Dollar, making imports more expensive.  Since Malaysia relies on imported goods like food, machinery and fuel, this drives up prices locally.


2. How has inflation impacted the cost of essential goods and services in Malaysia?

Post Covid-19, food prices have surged drastically.  Transportation costs have risen due to fuel and diesel price adjustments.  Utilities like electricity and water are more expensive. Housing rents and healthcare fees have also gone up.  Nevertheless, wage growth has not kept pace with the inflation.  All these add up and make daily living more costly for most Malaysians.

3. What measures is the Malaysian government taking to address the rising cost of living?

The Malaysian government is addressing the rising cost of living through cash aid programs like Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), targeted subsidy reforms (especially for diesel and RON95 petrol), raising the minimum wage, and controlling prices of essential goods through the Payung Rahmah program. Structural economic reforms are also underway to boost wages and resilience.

4. What role does the increase in food prices play in the overall cost of living in Malaysia?

Rising food prices significantly increase Malaysia’s overall cost of living because food is a major household expense, especially for lower- and middle-income groups.  Food inflation has outpaced general inflation, impacting daily budgets directly and immediately.  In Malaysia, a significant portion of food is imported, so global price increases for rice, wheat, meat and a weaker ringgit make food more expensive.

In addition, higher food prices also indirectly affect other sectors.  Restaurants and hawkers raise their prices, increasing dining and catering costs across the economy.

5. How are wage levels in Malaysia adjusting to keep pace with the rising cost of living?

There have been effort mainly mainly spearheaded by the government to increase the wages.  Some examples are higher minimum wage, ie. RM1,700 from February 2025, a Progressive Wage Policy offering incentives for skill-based salary increases and major pay hikes for civil servants starting December 2024.  While the wage hikes provide some relief, they do not completely offset the rising cost of living.  Many Malaysians may continue to face financial challenges especially the B40 and lower rung of M40.

6. What impact has the rising cost of living had on lower-income households in Malaysia?

The rising cost of living in Malaysia has severely affected lower-income households, leading to reduced food consumption, increased financial strain, lack of savings, mental health issues, and difficulty to cope with education-related costs. These households are particularly vulnerable to price hikes in essential items.

7. Are there specific industries or sectors in Malaysia experiencing higher-than-average price hikes?

We do not have the official statistics for this question.  But, if we hazard a guess, we suspect healthcare, food and beverages, housing and private transport should rank higher in terms of price hikes.

8. How is the cost of living in Malaysia compared to other Southeast Asian nations?

We do not have the official data for this question.  From experience, comparing the capital cities among the Southeast Asian nations we should be saddled somewhere in the center in terms of cost of living.

9. What steps can individuals take to mitigate the effects of rising living costs in Malaysia?

Individuals in Malaysia can mitigate rising living costs by tracking expenses and prioritize essentials, cutting non-essential spending, buying in bulk, switching to public transport if possible and upskill ourselves for higher paying opportunities.

10. Has the rise in fuel and transportation costs had a significant impact on Malaysians’ daily expenses?

The rise in fuel and transportation costs has significantly impacted Malaysians' daily expenses, especially for lower and middle-income households.  Increased fuel prices lead to higher commuting and logistics costs, straining budgets and reducing consumption of essentials. Public transport inefficiencies also worsen the financial burden.

11. In what ways are young Malaysians, especially first-time homebuyers, being affected by the rising cost of living?

A lot of young Malaysian first-time homebuyers could not afford to buy houses due to high property prices especially those nearer to town / city area.  Many could not afford high down payment and the high monthly mortgage payment.

12. What is the role of currency exchange rates in influencing the cost of imported goods and services in Malaysia?

A weaker Ringgit reduces our purchasing power for imported goods and services.  In short, when Ringgit depreciates, imported goods and services become more expensive for Malaysians!

13. How are retailers and businesses in Malaysia coping with the rising costs, and are they passing these increases onto consumers?

To manage rising costs, businesses can negotiate with local suppliers (if possible) to secure better deals, diversify product offerings and enhance operational efficiency.  Despite these efforts, we suspect many still pass some of these cost increases onto consumers, reflecting the broader economic pressures affecting the consumers.

14. What long-term trends can be expected in the cost of living in Malaysia over the next few years?

Officially, inflation rate is projected to be around 2.0% to 3.5% in 2025. 

Based on our observation, we expect Malaysia's cost of living to experience moderate to moderately-high inflation over the next few years.  The escalated trade war started by the US will likely be the main culprit driving the cost increase worldwide.  Tariff retaliation, protectionism and de-globalisation are all likely to affect the supply chain and add on to the direct and indirect cost of goods.  Another big wildcard will be the geo-political conflicts between nations.  The last we need would be more wars that severely affect the source of supply and supply chain further.

In Malaysia, we expect housing, healthcare, utilities, food and transportation costs to remain under pressure.  

Contributed by

Sr Tan Wee Tiam

Executive Director

Olive Tree Property Consultants