KUALA LUMPUR: Malaysia is still able to gradually increase the minimum wage without causing disruption to the market, the Finance Ministry deputy undersecretary (economic research) for fiscal and economics division Dr Nirwan Noh said.
The country had done five rounds of minimum wage revisions since 2013, translating to an average growth of five per cent annually, he added.
"Prime Minister Datuk Seri Anwar Ibrahim previously said the goods and services tax (GST) will be considered when the minimum wage reaches RM3,000.
"The government is focused on a broader wage strategy which includes progressive wage policy. We also have other means to push wages through various guidelines, such as those within the employment sector. This policy should ensure each growth is sustainable and inline with economic growth.
"Given the labour income currently accounts for about one third of Malaysia's GDP, there is room for gradual wage growth without causing disruption to the market," he said during "MARC360 Reflections: Analyses of Malaysia's Budget 2025 And Post-Budget Debates" webinar.
He said the government has set a minimum wage target of RM3,000 before considering implementing the GST to ensure the general Malaysian households are able to meet the rising cost of living first.
"The implementation of GST will affect the ability for general households to spend so we are very careful in this approach so as not to affect our households too much.
"With the current sales and service tax (SST), the government can expand the scope because we have implemented it on the ground. With some expansion, there is a scope for the government to raise our revenue in order to fulfil some of our expenditure commitments in the future," he added.
On the petroleum-based revenue for the federal government, Moody's Ratings senior sovereign risk analyst Christian de Guzman said the outcome from the discussions between Petroleum Nasional Bhd (Petronas) and Petroleum Sarawak Bhd (Petros) is skewed to the downside.
However, the matter is still too early to establish due to uncertainties surrounding the outcomes of the negotiations.
"What we can say is it does perhaps pose a risk in terms of a worst case outcome, perhaps a deal in which Petros takes a significant enough revenue away from Petronas and curtails dividend from coming back to the government.
"This underscores the importance of expanding non-oil related taxation or other sources of revenue so you can lessen that risk," he said.
"However, the deadline (of the discussions between Petronas and Petros) have come and gone and the 2025 Budget did not indicate any fundamental changes in the revenue pie pertaining to oil. So it is indeed too early to tell," he added.