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Okay, everyone gets RM5,422 to spend as you like. Like this?

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Would you like the government to give you RM1,000 to spend anyway you like as part of the economic stimulus which will be announced soon? Well, how about if the government were to give each and every Malaysian aged 18 and above RM5,422 instead? No strings attached. Just spend it any way you please. As of now, no one has any idea about the economic stimulus to counter the COVID-19. However, we do know what Hong Kong government is doing.

Article in bloomberg.com Main feature of the Hong Kong government’s budget is a one-time cash handout of HK$10,000 (RM5,422) to each permanent citizen of 18 years or older. Financial secretary Paul Chan estimated that the deficit will reach a record HK$139.1 billion in the coming fiscal year.

The budget is aimed at stopping the slide of the collapsing economy due to months of political unrest in Hong Kong. Economists have forecasted that Hong Kong will face a second annual contraction because this year, coronavirus outbreak has added even more pressure to the government struggling to eke out an economic growth.

Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA said of the cash handout, “This is obviously untargeted and regressive and will not solve the problem of those most severely hit.” Accounting firm KPMG LLP pushed for handouts yet in the form of electronic vouchers to encourage direct spending, rather than saving or moving the cash abroad.

For the home buyers, Hong Kong Mortgage Corp will launch a pilot programme offering fixed-rate mortgage loans through the banks to provide them with more options and reduce risk of interest rate volatility. Please do read the details of all the other measures in the budget in the full Article in bloomberg.com

The Singapore government under its budget 2020 will also be handling out money for Singaporeans age 21 and older. It’s a one-time payout of between S$100 (RM302) to S$300 (RM907). Why do these governments hand give money to its people? Well, the theory is that with money, one will spend them. Assuming you spend it to buy groceries, the supermarket will now have money to order supplies from the manufacturers. The manufacturers would then have to hire money people and these people would then be paid salary and with this salary, they will buy even more items.

This is called the multiplier effect and usually the multiplier effect could be 4 times. In other words, that RM5,000 given out will be multiplied by 4 times due to the effects it will bring to the economy. Note though that if people get the money and they save it into the bank, then nothing happens and the government has just wasted a lot of TAXPAYERS money… Well, the economic stimulus is supposed to be announced this week. Let’s wait and see if there are such good news too yeah.

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