Public Opinion Regarding Inflation with Special Reference to the Residents of Lembah Bujang

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Mr. Francis Xavier A S Rajoo

Language Department

University Teknologi MARA, Kedah Branch

Dear Sir,

Report on the Public Opinion Regarding Inflation with Special Reference to Residents of Lembah Bujang

On 3rd March 2015, Mr. Francis Xavier A S Rajoo, our lecturer for English for Report Writing (EWC661) has instructed us to conduct a study on “the Public Opinion Regarding Inflation with Special Reference to Residents of Lembah Bujang” and to submit my report on 27 May 2014.

The purpose of the report is to investigate the awareness of the public regarding the causes, effects, and ways to control inflation.

It is hoped that the findings provide useful insights for future references. I hereby submit the report and gladly hope it meets your expectation.

Sincerely,

………………………………………

(Muhammad Anas Fakhri Bin Mohd Zin)

2014236392

Faculty of Business Management

ABSTRACT

Inflation is a global issue that is faced by many region of the world and that include Malaysia. Deeper in to it, every component of society in the market forces of goods and services industry should be yielded with proper knowledge on inflation. Therefore, this study is to test the awareness and opinion of public towards inflation in Malaysia.

This study adopts a survey to explore and determine public knowledge on the causes, effects and ways to control inflation. It is true that Inflation will continue to always appear from time to time. It appears, in most situations, the level of understanding on inflation is still moderate among Malaysian. This paper tries to bring together and update on the current knowledge of public in Malaysia about inflation, whether they understand the components of inflation wisely at its most basic or not. It surveys some of the standard ideas and also the questionnaires drawn will question important thoughts on inflation.

This will be the frontier to determine the level of understanding on inflation by public in Malaysia.

1.0 INTRODUCTION

1.1 Introduction and Background of the Study

Examining inflation, there are two main types of inflation, which is demand pull inflation and cost push inflation. Demand pull inflation is inflation where the basic cause comes from the demand side. The constant increase in demand is due to factors such as increase in money supply, increase in government purchase, increases in exports and so on. When demand is increased and cannot be met by an equivalent increase in supply, the general price level will increase and inflation will happen.

Malaysia is one of the countries that have low inflation. The inflation rate for Malaysia averaged 2.9% per annum historically. Although Malaysia has generally experienced low inflation for around 50 years, nevertheless it had four periods of high inflation, which are mid-1970s, early 1980s, early 1990s, and late 2000s.

During the 1990s, inflation in Malaysia stayed above 3%, except for years 1997 and 1999. The price increases were broad-based, determined by both supply and demand factors. Throughout this period, domestic supply factors, especially food category, contributed significantly to inflation in Malaysia. Adjustments in administered prices by government, unfavorable weather conditions, labour shortages, continued shortage in cultivated land, and high capacity utilization are some of the factors that cause limitation on food supply. During the period of 1990s, prices of fruits and vegetables, fish and meat subcategories also rose.

Domestic demand factors also play a major role in inflation during the 1990s. Domestic demand was really high, due to strong income and growth of employment. There was a significant rise on the property prices and equity, sustained by strong growth of domestic liquidity and credit amid large capital inflows.

In 1991-1992, inflation rate in Malaysia goes above average. This is because the Gulf War that mainly involved Iraq and United States which caused the increase in world oil price. Consequently, the surge in world oil price caused the rise of inflation in Malaysia.

In 1998, inflation in Malaysia reached a peak of 5.3%. The ringgit depreciated around 28.3% against US Dollar towards the end of year 1997. This leads to cost increase, arising from higher import prices. Malaysia also faced a cyclical shortage on essential food items. Due to high cost of import, Malaysia government imposed ceiling price of five price administered items, which is sugar, flour, milk, cooking oil, chicken.

During the early 2000s, Malaysia faced moderate to very low levels of inflation because supply and demand pressures that happened in the 1990s had decreased. However inflation started to increase in year 2005 and reached a peak of 8.5% in 2008. External factors, for example higher global commodity and food prices, and also the global financial crisis caused higher inflation rates during this time period. The rise of global commodity prices was caused by both demand and supply factors.

Global crude oil prices increased because of disruption in oil supply and geopolitical developments. Global warming worsened the food shortages. All these incidents caused increase in global commodity prices.

During 2009, inflation rate suddenly decline to below -2%, before going up again to average from 2010 to 2012, hitting 3.2% in 2011. From 2013 to 2014, Malaysia experienced an average of 2.5%, before going down to 1.8%, as recorded in April of 2015.

1.2 Statement of the Problem

Malaysia is currently experiencing the early phase of Goods and Services Tax (GST) implementation starting April 2015. Even though the purpose of Goods and Services Tax (GST) is mainly to lower the burden of tax imposition towards consumers producers, through Services and Sales Tax (SST) beforehand, the greediness of most sellers and producers have suddenly fluctuate up the price of goods and services.

Due to this, inflation can be said to occur because many sellers deliberately increases the price of goods and ultimately, final consumers are the ones