KUALA LUMPUR: The 2025 Budget has the potential to transform Malaysia's household income classification system from a "pyramid" shape to a "diamond" shape, similar to that seen in many high-income developed countries today.
Economic analyst Datuk Dr. Nazri Khan said the current classification of household income into B40, M40 and T20 is shaped like a pyramid, with the lowest income group being the largest.
Nazri Khan, who is chief investment officer of Berjaya Mutual Bhd, said with the various measures and initiatives in the budget, the system could shift to a 'diamond' shape where the middle class or M40 group will grow larger.
"This budget is the beginning of the government's efforts to expand the middle class.
"I believe that if this trend continues, in the next two to three years, the middle-income classification will rise to M60, with household incomes ranging from RM5,000 to RM15,000.
"Many have overlooked or are unaware that Prime Minister Datuk Seri Anwar Ibrahim's measures in the budget are aimed at strengthening the foundation and widening the middle section.
"The increase in the minimum wage from RM1,500 per month to RM1,700 effective Feb 1, 2025 is the start of 'fattening' the middle class," he said on the Borak Harini Podcast titled "Analysis of Budget 2025: A Budget for the People", which was broadcast on BH's social media today.
Other panellists on the Borak Harini Podcast were UOB Kay Hian Wealth Advisors Sdn Bhd head of investnment research Mohd Sedek Jantan and BH economic news editor Kamarulzaidi Kamis. It was hosted by BH economic news editor Shahrizan Salian.
Nazri Khan said the new minimum wage proposed next year has the potential to steer Malaysia toward becoming a high-income country.
The factors for this are already visible at present, and they have been demonstrated through the current performance of Bursa Malaysia and the ringgit.
He noted that Bursa is currently the best-performing stock market in the world, and similarly, the ringgit is the top-performing currency among its regional peers.
"These need to be further enhanced with various other factors, such as attracting more foreign direct investments (FDI) and finding ways to sustain the current performance," he said.
Nazri Khan said all parties should seek ways to accelerate the expansion of the middle-income category as quickly as possible.
He explained that while the public often hears about declining inflation figures and positive economic growth, these are not being felt by the people.
This is because, he said, Malaysia is currently facing a perception gap where wage increases do not match economic growth.
"However, in my view, what is 'missing' right now is the middle class. How do we enlarge this middle class?
"GST (Goods and Services Tax) cannot be implemented (now) because the majority of the people's incomes are below RM5,000, and we have around two to three million gig workers working 12-hour days.
"We want to introduce GST to increase value-added, but we face a perception gap. The economy is growing at five per cent, but wages are only rising by around two per cent. This hasn't yet been translated, and it may take several years.
"However, this is what we need to focus on because Malaysia is currently in a pyramid-shaped income classification, unlike other countries that have already moved to a 'diamond' shape," he said.