How To Spot A Good And A Bad Budget

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Friday the 13th is not normally auspicious but it will bring the first Madani Economy budget for the unity government and Prime Minister Anwar Ibrahim.
It will be easy to spot a bad budget if it hails higher spending as the main metric of success, especially if it also means higher borrowing.
If Budget 2024 is a laundry list of special interest patronage as we saw so often under previous administrations or if initiatives are artificially fitted to the Madani framework, as we saw in the revised Budget 2023, this will also be a bad budget.
Budget 2024 should appeal to the rakyat, but to reassure stakeholders that there is a clear plan consistent with the vision and mandate of the unity government it should also be consistent with the seven Madani Economy targets and other key areas of the Madani framework.
With difficult global headwinds, the target to be among the world’s 30 largest economies will rely on effective domestic policies, a sustainable fiscal plan and long-term reforms.
So, a good budget should focus on sound fiscal governance and spending within the constraints of revenue. In line with the Madani Economy 3% deficit target, overall spending should only increase if revenues have increased to avoid higher borrowing.
Savings from cutting wastage, leakages and corruption should fund other priorities to emphasise the benefits of the anti-corruption target to be in the top-25 in the Corruption Perceptions Index.
For example, cutting corruption and improving social protection in line with the Madani Economy target of being among the top-25 in the Human Development Index more clearly connects the anti-corruption agenda to social development.
We will also only know what taxes and tax rates are necessary when corruption, wastage and leakages have been reduced so there should be no major changes in taxation until this is cleaned up.
Taxes on consumption should also not be raised until incomes have increased. Otherwise, people will be burdened at a time when they are already struggling.
Consistency with the 12th Malaysia Plan would keep development expenditure around RM90 billion with savings from cancelled and rescheduled projects reallocated and co-funded by the private sector in line with the New Industrial Master Plan (NIMP) and the trade and investment liberalisation agenda to ensure Malaysia is ranked in the top-12 for global competitiveness.
Budget 2024 must also have a clear subsidy rationalisation plan continuing from the short-term initiatives already having effects and extending for the long term. Again the savings should be directed to social protection and in particular on raising disposable income.
Middle-income groups will be hit hard by subsidy reform and they already need help with the cost of living. So reform of the labour market to raise incomes, incentives for secondary incomes, flexible working arrangements, freelancing, micro-enterprises and the gig-economy should all be enhanced.
The market is moving this way already and to raise the labour share of income to 45% will require meaningful labour market reform to promote this.
Gender discrimination will also signal a bad budget, making 60% female workforce participation challenging. Traditional handouts to mothers with young children incentivises them to stay at home and 98 days paid childbirth leave with only seven days for men discourages employers from hiring women.
Payments to hire and rehire women also disadvantage men, especially young men. So applying equal treatment to men is a key part of a good budget.
The consequences of millions more women joining the workforce, possibly forcing down wages for everyone, have not been fully evaluated and need to be carefully weighed.
A good budget will deal with the intended and unintended consequences of government interference. A bad budget, like all the previous ones, will ignore them. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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