The Stimulus Package

Now that petrol price is no longer an issue, what has surfaced as contentions for public debate is the recommended 3% reduction from the employee portion of the EPF monthly contribution.Although the intention to place higher disposable income in the hands of the workers is noble the other side of the argument is that EPF is meant to save for post retirement. Perhaps some people may not appreciate how difficult it is to just survive after one's retirement.That you need as much savings as you can to get along with life unless you manage to continue working.Somewhere in the equation a salary earner with a 11% EPF deduction may not have a taxable income whereas a 3% deduction will throw him into the taxable bracket. Try those with a RM2750 monthly income.In any case it is better to save for the rainy days than to spend it now.

As to whether the RM7 billion stimulus package is enough to maintain a reasonable growth figure for next year no one for sure knows. One thing for sure is crude oil prices has fallen more than half of its peak of US$147 in mid-July this year (at around US$55 per barrel) and so is palm oil and rubber.This will place a strain on revenue.One needs revenue to spend to generate growth.The good news is interest rate is lower but the banks are saying its not going to help them generate more lending.Why? Because banks may be afraid to lend.The construction sector seems to benefit most with the RM7 billion package but if the contractors get the jobs the ringgit will trickle down to the workers, who are mostly foreigners.The haste to spend may also pose problems.Implementation problems. Simply put, those who deserve do not get and those who do not get the jobs.Small roads, big roads, urban roads, rural roads, bridges, schools, houses etc will be the focus.Lets hope it works.China is setting aside US$565 billion stimulus package, South Korea US$300 billion, Singapore unlimited.US itself is already allocating US$700 billion, initially meant to buy up the banks' toxic debts but has since being diverted elsewhere including Citigroup.Our stock market has lost more than RM600 billion since the beginning of the year.The KLCI is not getting any better.In the meantime the ringgit is weaker against the US Dollar which is in a recession.From a high of RM3.10 six months ago it is now RM3.61 (as of Monday 24 Nov 08) so anything we buy we will have to pay more.Some will say but our products will be cheaper and more will buy but since everyone is almost in a recession, they will buy less.