'Here are five suggestions for the new finance minister aimed at addressing concerns of the low-income group...' - Pankaj C and Kumar
Big drop: The Dow industrials plunged more than 2,300 points or 10% on Thursday due the Covid-19 scare. — APIt is not often we see multiple events playing out at the same time to create what is define as a perfect storm. This storm has been building up over the past couple of months but it intensified over the past two to three weeks as markets went into a tailspin while governments struggle to contain the impact of Covid-19, which is now define as a pandemic by the World Health Organisation .
The second curveball which slowly turned out to be a black swan event for the market was the coronavirus or what is now known as Covid-19. Slowly but surely the number of cases and deaths rose and by the time we were in the midst of celebrating the Lunar New Year towards the end of January, markets became occupied on the strength of the spread of the virus not only in China but outside China.
As if the Covid-19 has not caused enough damage to markets, we had another black swan event to deal with, this time from oil. Over the last weekend and before markets opened on Monday, the unexpected happen as Opec and Russia failed to agree on further production cuts to stabilise oil price and as a result, neither Opec nor non-Opec members are now restricted on their level of output.
Thirty-year US treasury yields fell the most as yields dropped a staggering 59 bps intraday to as low as 0.699% on Monday – the largest drop ever, before bouncing back and was last seen at 1.43%. The US stock market also plummeted with the Dow down more than 2,000 points twice this week, which is clearly unprecedented as far as the index point value loss is concerned.
With the house in order, the new Cabinet has its work cut out, especially for the new finance minister, the minister in the PM’s department , the international trade and industry minister and the health minister. We can safely assume the 80/20 rule will apply here and hence we perhaps need to discount the impact of the RM10bil enhanced disposable income due to the cut in EPF rate by 36% to RM6.4bil – meaning 20% of contributors will likely opt to keep the original 11% rate and for those who have higher disposable income due to the lower EPF contribution rate, only 80% of that extra disposable income is actually spent on consumption.
> Reduce the corporate income tax rate for 2020 by four percentage points to 20%. The lower tax rate could see corporates reducing their tax liability by about RM12.5bil and this could boost the net earnings of companies, which in turn could see them providing higher dividends to shareholders as well as boost consumption and investments.
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