The cautionary tale of Malaysia's inflation

THE relevance of oil in our daily lives is often understated. Many consumer products are derived from oil and these form a major component in consumer spending worldwide.

However, with the low oil prices, which we are currently experiencing, inflation around the world is directly affected. This prompts economies like Malaysia to take this opportunity to implement inflation-driven policies, in an attempt to reduce current account deficits. For example, the 6 per cent goods and services tax (GST) which begun last month, although it was unpopular with the Malaysian consumers.

The implementation of this GST policy seems extremely timely as Malaysian inflation figures are currently at a low of 0.9 per cent in March. This GST policy would most likely push inflation up which would work well for Malaysia provided inflation is contained at 3-4 per cent.