Reduce household debt should be the priority of 2016 national and state budget

Media Statement by Johor DAP Policy Director and Senai State Assemblyperson Wong Shu Qi on 9^th October 2015 (Friday):

Reduce household debt should be the priority of 2016 national and state budget

The Prime Minister will table the 2016 Budget on 23 October 2015.  In the midst of economic difficulties, the federal and state government should take effective actions to lessen the burden of the people.

One worrying trend is the increase in the number of bankruptcies year after year since 2007. As of October 2013, there are 116,488 Malaysians categorised as bankrupts by the Malaysian Department of Insolvency.

According to the state government’s reply to my question in the last assembly sitting, in Johor alone, there are 20,861 Johorians declared as bankrupts from 2008 till 2015. Hence on average, there are about 2,600 Johorians declared as bankrupts every year since 2008, or more than seven bankruptcies a day in Johor.

Nancy Shukri, the then Minister in Prime Minister Department, announced in 2013 that in the whole country, vehicle mortgage defaulters are the highest among all defaulters, followed by property loan defaulters. Johor experienced similar trend; the majority of bankruptcies are caused by property loan default. In the past eight years, 5,545 bankruptcy cases were due to house loan default.

However, the second highest cause of bankruptcy in Johor is personal loan default (5,523 cases) while vehicle mortgage default ranks third (4,624 cases).

Reasons of Bankruptcies in Johor (2008-2015)

Such trend reflects the reality in Malaysia today. Many households which may not be eligible for mortgages to purchase private vehicles and houses in other countries are forced to do so in Malaysia. The root causes is not solely consumerism and materialism but it is our malfunctioned public transport system and profit-oriented housing sector.

Most people have to own personal vehicles for job accessibility. Similarly, there is little or no option for affordability housing in good locations with good facilities.

It is noteworthy that Malaysia’s household debt as a percentage to our GDP is now as high as 88% according to Fitch Ratings. Unsurprisingly, most of the debts come from vehicle and house purchase. This poses a risk to our economy especially when during downturns.

Therefore, I call upon the federal government and the state government to make the reduction of household debts a priority for the 2016 Budget. The goal can be achieved by providing more accessible public transport and more rent-to-own housing scheme nationally.

Instead of having more cash transfers, the government should think of reducing the unnecessary loan burden of the rakyat immediately.

Wong Shu Qi