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Budget 2027 was tabled in Dewan Rakyat today, and now the crucial evaluation begins. At RM460 billion, this is the biggest budget yet. But beyond the headline figures and new announcements, the question is whether public money is being spent where it can make the greatest difference. So did this budget get the balance right, between managing the cost of living and keeping public finances under control, all while gearing up for a year of elections. On this episode of #ConsiderThis Melisa Idris speaks with Aira Azhari, CEO of the think tank IDEAS Malaysia and Sum Dek Joe, economist & Policy Spokesperson for Parti BERSAMA Malaysia.
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00:14hello and good evening i'm melissa address you're watching consider this this is the show where we
00:18want you to consider and then reconsider what you know of the news of the day budget 2027 was
00:23tabled in day one right yet today and now the crucial evaluation begins this is the biggest
00:29budget yet that has that the government has tabled at 460 billion ringgit but beyond the headline
00:37figures and the new announcements the question is whether public money is being spent where it can
00:43make the greatest difference so did this budget get the balance right between managing the cost
00:48living and keeping public finances under control all while gearing up to be ahead of a year of
00:55elections as we all know is expected in the coming year so joining me in the studio today to discuss
01:02budget 2027 i have with me ira azhari the ceo of the think tank ideas malaysia and samdek jo who's
01:08an economist and policy spokesperson for party bersama malaysia he's also the author of the
01:14party's shadow budget welcome to the show thank you so much for joining me um having digested the
01:19budget earlier today i want to begin with some of your initial reactions to budget 2027 iraif i may
01:25begin with you did you see any evidence of um political considerations that have maybe shaped the choices
01:34of the allocations in this budget what what was your takeaway from this budget thanks mel so there's been
01:41a lot of talk of course about this budget possibly being the last one before we go into pru 16
01:47um
01:49after looking at the budget uh to be honest you know it was not easy to read the entire thing
01:55uh
01:56in the in the in the few hours that we had uh there are some elements of that i believe
02:01because
02:02i mean there is an expansion of uh str and sara for example and i believe that sara can also
02:09now
02:10be used at the wet market in pasar tani so uh things like that is uh clearly targeted to
02:15ease the burden of lower income households um and i think there are also some things for the middle class
02:24uh on tax uh tax breaks tax reliefs um and at the same time there are also some goodies i
02:32see for young
02:33people and for students so um looking at those elements uh you can say that there is an uh that
02:40there are definitely signs that uh certain voter demographics are being targeted of course um yeah
02:48and i think you know we can probably have a long longer conversation about things like the minimum wage
02:54uh but there that there is a quite a substantial increase actually uh in the minimum wage although
03:01there is a very large exemption actually for businesses uh that you know earns less than 50 million
03:07uh so yes i would say that there are elements of that um although you know i do believe that
03:15every
03:15budget in in malaysia does have that kind of giving away goodies elements expected it's almost expected
03:23uh that can't be avoided uh that can't be avoided uh at this point um yeah so is that a
03:29good thing
03:29that we're expecting every budget we think we think oh what is it what's in it for me is there
03:35how
03:35many how much handouts and all of that we're kind of counting it right i mean i do think that
03:41um in the
03:42long term i don't think that kind of uh expectation is uh sustainable um i also don't think that
03:51it's a good idea to normalize this um yeah this kind of expectation that the government is supposed to
03:58give free things to everyone uh the government's main job is to manage the country manage the economy
04:04yeah so uh sometimes giving away uh free things is not uh good for the economy uh and it is
04:13not the
04:14right way to manage the country for example so there needs to be a balance between those two okay i
04:20see
04:20you nodding joe so let's let's bring you into the conversation uh what were some of the things that
04:25stood out to you and i'm quite curious to know how you looked at this from a kind of economist
04:30perspective how much fiscal space did malaysia or did the government really have to maneuver with
04:35this budget so before before addressing the fiscal space but i think it would be more interesting to
04:39to basically touch upon what you just mentioned on goodies so we actually need to start rethinking
04:43why are malaysians paying so much attention on goodies in annual budget cycle is that really
04:51what it's supposed to be if it's you know whether other countries are doing the same thing as well
04:55it's actually quite different so malaysians somehow we are so used to goodies in the budget
05:01and why that is the case is simply because we have a very weak social protection system
05:05uh and what it means is basically they are our rights or our benefits they are not enshrined or
05:10they are not stated in a clear legal documents which means that our benefits are subject to political
05:15changes and political cycles right so whenever a government spending priorities or whenever the
05:21government is near an election term you will naturally see an increase in benefits but it's
05:27very different and it's not really a good international practice because what a good international practice
05:32is is to actually institutionalize social protections for example your str your sarah technically these are
05:40the items and expenditures because well um you know we have a society made up of people from different
05:46income groups and obviously the low uh income households will always require help and financial
05:51support and that makes sense but it should not be at the mercy of the policy makers of the day
05:56technically the benefits and the support should be institutionalized in a set of budget or
06:03sorry in a set of legal documents so that the rights are protected regardless of the change
06:07in political cycle okay i like i like what you said so we'll come back to the fiscal space but
06:11i
06:11like what you said about maybe training the population out of the expectation of goodies
06:16in budget and by doing that is having a stronger social safety net what so i want to bring up
06:22brasama's shadow budget uh that you co-authored you in that document really argued that malaysia
06:28cannot afford to manage one crisis at a time now i'm wondering your perspective on this budget 2027
06:35where do you see the government tackling the underlying structural problems in the economy and where do you
06:41see just managing the symptoms well to be very honest with you my frank discussion my frank assessment is
06:46it doesn't at all it doesn't address any structural issue at all so to me it's exactly what the shadow
06:51budget has said the annual budget cycle of malaysia basically has turned into a firefighting exercise
06:56which means that whenever there's a fire you try to put out a fire but you don't plan long term
07:00into how to prevent the fire from happening so our annual budget cycle including this recently
07:05uh table budget basically adopted the same approach as well so for example we look at uh uh the cost
07:12of
07:12living right so one of the ways that the government addresses cost of living in this budget is to
07:17increase the minimum wage but whether increasing minimum wage is really addressing the root cost of
07:23low wage growth in malaysia unfortunately it is not which compression is already happening despite a
07:30revision multiple revisions of minimum wage growth right so minimum wage was introduced in 2013 and
07:35it was revised in 2016 19 and then 22 right and yet we are still seeing which compression happening
07:42people are not earning enough wage so increasing minimum wage itself is just a firefighting exercise
07:49where it doesn't really address the root cause or the structural issue of our labor market so that's
07:55why i keep saying that we have to adopt a more uh visionary uh a more not just visionary but
08:02also have
08:02the foresight to address the structural root causes that that basically cause the problems that are
08:08happening today so if not minimum wage then what would address wage compression so to be honest so if you
08:14look at shadow budget our shadow budget we actually adopted a multi-pronged approach but one of it is
08:19actually to put a cap uh not just only put a cap but also have a full comprehensive system to
08:24look at
08:24how we can properly address uh our over reliance on low skilled labor uh foreign labors right it's not
08:33just putting a cap to it but also to train to incentivize local firms to upgrade to automate and
08:39stop relying on low skilled um foreign workers because we have uh 13 of a population 13 of a labor
08:47force
08:47is made up of low skilled foreign labors and that disincentivize firms local firms to automate to
08:54upgrade to even train the local staff because they can always resort to a much lower pay or even uh
09:00a
09:01low skilled uh foreign labors okay i know what what do you think um the issue of minimum wage and
09:06i think
09:06i want to couple that also with the fact that the government is now encouraging employers to adopt a living
09:12wage benchmark right so let's begin with minimum wage um how do you see businesses responding to this
09:19and do you think it will be politically costly for the government um to defend it if there is resistance
09:27and pushback yeah so uh okay let's look at the issue of minimum wage in general and let's ignore the
09:35exemption for um businesses below 50 million but that's that's a big point right yeah yeah so 50 million
09:41is it's a very high threshold it's a very high threshold yeah um this is beyond smes already okay
09:47so um you think of how many smes yes and our economy is 90 plus 98 smes right so that's
09:55a huge uh that's
09:57a very large threshold uh firstly and there's a reason why that threshold is there no the government
10:02must know that uh small businesses cannot afford the increase in minimum wage and that might result
10:11in layoffs in uh yeah that joe mentioned the reliance on uh foreign uh low cost low wage foreign labor
10:20uh and it will call there might be all these unintended consequences so there's a reason why the
10:26exemption is there so i feel like the increases and increase is substantial as 300 ringgit 1700 to 2000
10:33and this is not the first time of course that the minimum wage has been increased
10:36uh the exemption is there for a reason and secondly um looking at it from if you look at it
10:43from an
10:43employer perspective uh okay if there is if there is this legal requirement to increase uh minimum wage
10:51uh what do you do then do you also increase the uh job description of the employee because
10:57hours because from an employer's perspective okay i'm increasing your wage by 300 ringgit let's say
11:03um but do i just uh does your job remain the same uh of course employees will be like you
11:10know what i
11:10think i need to increase the amount of your workload as well to be proportionate with the increase in
11:15minimum wage so these are elements of you know of of employer employee relationships and considerations
11:23that as a government sometimes you will overlook because you know you see they see things from a very
11:28bird's eye perspective well there could be the concern of passing that cost on to consumers exactly
11:33that's the other thing so there are there are consequences here that uh the government might
11:38not intend uh that might result in uh this increase in minimum wage but again this exemption the threshold
11:44is very high so um it would be interesting actually to see what kind of businesses would then be
11:51required to do to to you know increase this minimum wage and how they are handling it that'll be
11:57interesting joe can i ask you so you talked about wage compression from the employees perspective what
12:03about the employees how do you think this is going to land among businesses so in fact it's going to
12:07be very tricky as well to be honest because setting a threshold it creates arbitrage right it creates
12:11arbitrage so basically if i'm a company i own a company of say 40 million turnover why would i want
12:17to
12:17upgrade or why would i want to pass that threshold of five or 50 million yeah right i can always
12:22try to
12:22as soon as my turnover becomes 50 million or 60 million i will try to create as many companies and
12:27offload the turnover or my sales to other companies to make sure that it stays below the cost so that
12:32i
12:32don't have to pay the minimum wage of 2000 you can cook the books you can cook the books and
12:36in fact
12:37there are so many it creates so many loopholes for companies to exploit and how are they going to enforce
12:43it it's extremely difficult for you to not have so first of all i don't quite agree with having a
12:48minimum wage policy because for example in other countries such as singapore they don't actually
12:51have a minimum wage policy right and yet look at how high the wages are is that a controversial thing
12:56to say it can be quite controversial but i do think that minimum wage is not a silver bullet to
13:03the wage compression or the slow wage growth problem that malaysia is facing it's definitely not as i
13:09mentioned minimum wage has been around since 2013 and he has never solved our problems our wage remain
13:15low and we need to tackle the root cause of our slow wage growth okay so so part of the
13:23conversation
13:23around slow wage growth wage compression is uh under employment and that ties into youth so we've been
13:29talking a lot in this budget while looking at the allocations for young people quite a number of things
13:34you know you've got the um form 6 uh allowance you've got uh ppt and um repayment issues so let's
13:43talk
13:43about that ira talk to me about whether you think the budget measures the allocations today actually
13:48address the problems that young people are facing today yeah well i i still think that the core problem
13:55faced by young people are jobs and wages right and we've talked about some of this but uh and both
14:02of
14:02that are they're both interrelated with one another uh so there is there are many reasons why our wages remain
14:08low and they are compressed uh the over relies on foreign workers is one but secondly it's because
14:13our economy is not creating the kind of jobs that uh will generate the high income that is befitting
14:20our young people who um who many of them now have university degrees right so the promise that was given
14:26to the this generation that uh you have to study hard and then make it to university get a good
14:32degree
14:32and you get a good job that is increasingly becoming uh a promise that is unable to be kept by
14:39by the
14:39country um and that this is resulting in many things and under employment is one of them so um that
14:46really
14:46is the core problem uh to solve that it requires i think an entire rethinking of um the education system
14:55uh you know the the kind of businesses and the kind of uh the kind of companies that we need
15:00to have to
15:01generate those jobs as well so these two still remains um i think the main concern uh for a lot
15:08of young
15:08people um things like you know the allowance for uh form six students and then i believe there are
15:15some assistance for flight tickets um for ipta students uh i that that's all i think um not problematic
15:25uh you know these are short-term incentives uh for students uh to to enjoy um and yeah i mean
15:33clearly targeted at the voter demographic as well given your your advocacy for reform institutional
15:38reform i'm sure you were happy to hear about that our coup
15:41announcement right of course yeah yeah um yes and we also need to uh get the details of course on
15:48what is
15:49this new law that's going to replace our coup uh we do not want an even more regressive law
15:55than our coup of course uh and perhaps there needs to be a separation because remember the thing about
16:00our coup is it is both it is both a law that sets up the administrative system of universities uh
16:07how
16:07boards and vice chancellors are being appointed and it also uh tackles uh student activities right so
16:14this the part about students cannot join politics and all these things so perhaps there needs to even
16:19be a separation between those two or we should just get rid of the all these restrictions on students
16:25and just focus on an act on how universities are governed which also needs a lot of improvements
16:31for example you know the vice chancellor the selection of the vice chancellor cannot be political
16:35and obviously yeah joe did you did you see the um allocations for youth as maybe addressing some
16:43of the um well making them happy for one thing but also addressing some of the concerns that young
16:48people have i think young people would rather have a higher wage than a one-off allowance to be honest
16:52i i i'm being very frank and critical over here uh i think a form six uh a form sixes
16:58or even preschool
16:59or even ip students they would value a much better higher paid wage prospect rather than having a one-off
17:08um allowance as what um stated in a budget because as i mentioned it's the wage issue i think if
17:14you
17:14if you look if you ask if you ask any ipta students today what are the main concerns the concern
17:19is to
17:19land a good job that pays well and we don't have it in malaysia that's why people are leaving the
17:23country
17:24people are seeking jobs elsewhere or people are pushing they are pushing away from people from uh from
17:28formal workers from formal sectors to informal sectors and that's why we have such a high
17:33an underemployment rate one in three more than one in three of our university students uh are
17:39underemployed they are they are they are working in sectors that do not match the skills right do you
17:44see the um the government encouraging employers to adopt a living wage um that that benchmark of 3 400
17:51if i'm not mistaken um is that is that in a way going to help with um increasing the wages
17:57for young
17:58people i mean you can always try to encourage but eventually it's the market it's the market force right
18:02it's really up to the government it's really up to the firm to decide whether to follow or not and
18:05very likely the firms will say well we can't do it unfortunately we're just going to stick with
18:08whatever that we have right uh so i'm going to circle back to the question that i opened in the
18:12beginning but we got sidetracked with other allocations when we're talking about the fiscal
18:17space of the country so um this has been a really tough year and i think a lot of that
18:22has to do with the
18:23crisis in the middle east how much genuine room fiscal room does the government have to maneuver so
18:29just to be very frank there is not much room because we actually have akta fiscal well we
18:33have a fiscal responsibility act 2023 which basically stipulates that the government needs to bring down
18:38the debt by 60 percent uh below 60 percent by 2028 and right now we are looking at 2027 in
18:44the budget
18:45based on the budget estimates uh we are looking at 63.7 percent so basically we only have one year
18:51to reduce
18:53our debt to gdp ratio down to 60 percent based on uh the fiscal rule that was set by the
18:59government
18:59itself and we do not have much time we only have one year to go and very likely that the
19:04government
19:04won't be able to meet the target or the fiscal rule that dare themselves design and pass in the
19:09party you don't think it's possible what makes you so pessimistic well because we still have a deficit
19:13we still have a big deficit so uh so right now 2025 uh in 2020 sorry in 2026 budget uh
19:20the original
19:21fiscal deficit was 3.5 but because of the oil price spike uh that happened in april this year uh
19:26the
19:27budget estimate the fiscal deficit for 2026 has been revised up to 3.6 percent right and then in 2027
19:33they aim to bring it down by um 0.3 percentage point to 3.3 but uh we still have
19:38a primary we still have a
19:39primary deficit which basically means that the government is still uh incurring more debts to
19:44to uh to financial deficits so it's not going to hit anytime soon well my concern and i wanted to
19:49ask you whether you share that concern was whether or not we're spending enough on development
19:52expenditure i'm looking at the figures and it looks like we are spending less on development
19:57expenditure this year than we were in the um previous budget uh are you concerned about that at
20:02all uh actually in nominal term is actually more oh it's more yes so in 2025 in 2026 was 81
20:07billion
20:08that was allocated to dvex to de development expenditure and then in 2027 i think they
20:13increased it to 84 if i'm not wrong gross development expenditure but you are right to
20:16point out that it's actually smaller because nominal term does not is not a right metric to
20:21assess the size of a budget technically we should look at as a share of gdp right so as you
20:27started when
20:27you when you when you started the interview you mentioned about the biggest budget every year is
20:31always a biggest budget because the economy is growing right so it's more important to look into
20:36the as a share of gdp whether devax the development expenditure has actually increased and the
20:40answer is no it is decreasing so it's decreasing from 3.7 uh of gdp to 3.6 of gdp
20:48so it's actually
20:48one 0.1 percentage point lower so it's it's not good it's definitely not good because our current
20:54expenditure is so strained and it's so inflexible we currently we don't really have much room to move
20:58our operating expenditure in part because of a huge subsidy burden that we need to bear as a result of
21:04the oil
21:04price spike so we have to sort of uh we have to maneuver and we have to make uh um
21:10trade-offs and
21:11forego uh our development expenditure to make space for current expenses do you think that the public is
21:17aware of this trade-off that every time we use subsidies we're trading off money that can be spent
21:24to develop our country is that trade-off has that trade-off been made clear i don't think so and
21:28i think
21:29i think it relates to a bigger i think it relates to a bigger issue as as i indicated in
21:34the shadow
21:35budget malaysia society is suffering a severe public trust deficit no one would believe that paying more
21:43taxes would result in a better improve of public service delivery no one believes that forgoing my
21:50subsidy of raw 95 today would result in better education outcomes or better preschools or you know better
21:57living standards because of a huge trust deficit that the society has with the government right
22:03and why do we have a huge trust deficit well of course we have all sort of corruptions wrongdoings
22:08misappropriations that really deteriorates and erodes public confidence towards the government
22:12so as a result any reforms to to to rationalize your subsidy or any reforms or any tax reforms would
22:20be
22:20very difficult for society to accept because there's this trust deficit so until the government
22:25starts to address trust deficit it's not going anywhere and our physical space is shrinking we
22:32are we are it's just a matter of time that we hit the roadblock before uh before our uh our
22:37our
22:37interest rate um uh gonna go up so our interest cost for 2026 alone it's 50 59 billion if i'm
22:45not wrong
22:45and in 2027 budget is estimated to break 60 billion so every one ringgit that we collect in revenue today
22:53every one ringgit that the government collects in revenue today 16 cents goes to just serving the
22:59interest it's not even repaying the debt it's just serving the interest which basically doesn't have
23:04any productivity value so would the um counterbalance to that be to increase the revenue which the shadow
23:10budget argues is through gst right through gst and also rationalize some of the subsidies so in our
23:17budget we found out that actually if we do targeted cash uh if we do targeted subsidy for example so
23:23instead of providing 300 liters as a quota that applies to every malaysians we should focus really
23:29on uh our lower income household for example our b40 or even m40 so 80 percent based on our calculations
23:35we can save 19.2 billion by transferring cash directly to household in a form of fuel allowance you can
23:46use
23:46the cash for whatever reason but it's a fuel allowance and it can save 19.2 billion and it
23:51benefits 80 percent of our population without having this um blanket subsidy that we are having because
23:58blanket subsidy we are spending 45 billion in 2026 just on fuel subsidy alone okay ira i'm gonna give you
24:05the last word yeah uh and in the last word already yeah in the couple minutes that we have left
24:10can you
24:10talk to me about whether what you think the budget got right and where you feel that it fell short
24:18and
24:19i might also put you on the spot and say because you've also perused the shadow budget are there
24:24elements of the shadow budget that you wish you could have seen in this current budget yeah so i like
24:29what
24:30joe mentioned about the trust deficit in malaysian society so this is actually um something a really core
24:38issue that has implications on many things yeah so on on the on on budget but also you know on
24:44political outcomes and so on but one thing that i'm happy to see uh and this does play a role
24:51in
24:51restoring some of that public trust i hope um are is was the um uh what pmx announced on the
24:58ruu entity
25:00right so the government owned entities bill okay uh i'm not sure if this is the same thing with the
25:06state-owned enterprises act that uh i think was what in in their manifesto before uh it sounds like
25:12that's what it is because it says that it will um apply to companies statutory bodies and then he uses
25:18the examples of 1mdb tamu haji infelda so this is a good step in what i hope you know could
25:26could
25:26restore some of that public trust because as we know a lot of these public institutions uh are the ones
25:31that have been uh abused uh and has been subject to all these uh horrible corruption cases that we
25:38see very high profile uh corruption cases billions of ringgit being lost of course right so this is one
25:44step um that i see that could uh probably hopefully make a difference of course the devil is in the
25:51detail and uh this is uh still just uh you know like five lines in the budget speech right so
25:57we really need to
25:58see the details um where it where it has fallen short um again i do not see uh much about
26:05increasing our
26:06revenue base yeah so again budi 95 still there um there is no serious uh effort to really really think
26:15about taxes uh reforming our taxation system uh the bersama shadow budget uh does well in that respect
26:23yeah uh it tackles um sources of revenue uh and has very concrete suggestions on how to uh expand our
26:32revenue base uh very unpopular suggestions i'm sure right uh gst uh getting rid of budi 95 uh but i
26:40believe
26:41that in 2026 there is a way to communicate this to the public and that is so important i touched
26:46upon
26:47this as well during the bersama forum which is um we have to see this as a public education exercise
26:53as well and uh public education can't just come from one entity everyone including political parties
26:59have to play that role um and the malaysian public cannot keep seeing uh political campaigns that
27:07you know everyone's just promising free things to people right there needs to be concrete suggestions
27:13on how malaysia can uh really grow its economy in the long term uh and with gen z gen alpha
27:20and all the
27:21gents uh coming up uh you know are they really are they going still going to be born to an
27:27economy
27:28where uh they get degrees and then uh they can't make use of those degrees because our economy does
27:34not have opportunities for them uh that's a very sad future for them to be born into i i also
27:40want to
27:40say that i think the media should take some responsibility in having uh prime to this audience for
27:46good goodies and you know expectations and in budgets and that's a wonderful point thank you
27:51so much for both of you for being on the show with me today i appreciate you sharing your immediate
27:55reactions post budget thank you for your time that's all the time we have for you on this episode of
28:00consider this i'm melissa idris signing off for the evening thank you so much for watching good night
28:04good night