Budget 2027 puts household income ahead of headline growth

KUALA LUMPUR: The 2027 budget tabled by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim in the Dewan Rakyat on Friday sets out a broader attempt to turn economic growth into higher incomes, targeted assistance and basic services that households can actually use.

Federal spending is set at RM459.8 billion, made up of RM376.8 billion in operating expenditure and RM83 billion for development, an increase of 3.6 per cent on this year.

The government presented the budget as a RM510 billion package by adding RM50.2 billion in investment: RM25 billion from government-linked investment companies, RM11 billion in public-private investment and RM14.2 billion from statutory bodies and companies under Minister of Finance Incorporated. The RM459.8 billion figure is direct federal expenditure, while RM510 billion includes those investments.

The government is targeting a fiscal deficit of 3.3 per cent of gross domestic product in 2027, against a projected 3.6 per cent this year and a 3.0 per cent target for 2028. The budget carries the theme Menggapai di Langit, Mengakar di Bumi.

Wages take centre stage

The most consequential change is the increase in the monthly minimum wage to RM2,000 from RM1,700, effective June 2027. The additional RM300 amounts to a rise of about 17.6 per cent for workers covered by the new rate.

The government expects more than four million workers to come under it. Micro, small and medium enterprises with annual sales below RM50 million are exempted to allow time to adjust, but raising the wage floor still marks a shift in priorities: economic progress should come with better returns for workers.

The budget also sets a starting floor of RM2,500 a month for graduates and semi-skilled occupations. Government-linked investment companies and corporations are raising their living wage benchmark to RM3,400 from RM3,100 a month, which the budget speech says will benefit about 230,000 employees.

That emphasis matters for the cost-of-living debate. When pay rises on a sustainable basis, households are better placed to absorb essential spending without depending entirely on one-off transfers.

Assistance widened, not just enlarged

Funding for the Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah programmes rises to RM16 billion from RM15 billion. Up to nine million STR recipients qualify for SARA support of RM150 a month, or RM1,800 a year.

Adults aged 18 and above who are not STR recipients are scheduled to receive two RM100 SARA MADANI payments in 2027, before Aidilfitri and for the 70th anniversary of independence.

Extending SARA to wet and fresh goods at 216 FAMA farmers' markets is a practical improvement. A grocery benefit is worth more when a family can buy fish, poultry, vegetables and fresh produce with it rather than a narrow range of packaged items at selected outlets. The government is also aiming for 10,000 small retail shops to join the programme by the end of 2026.

Room for taxpayers

Basic individual relief rises to RM12,000 from RM9,000, the first revision since 2010. Rates fall by one percentage point in two bands, with chargeable income of RM70,000 to RM100,000 taxed at 18 per cent and RM100,000 to RM150,000 at 24 per cent. The rate on income above RM1 million is set at 30 per cent.

The government estimates that about five million taxpayers could gain up to RM1,600 in disposable income, depending on individual circumstances. Relief has also been extended to postnatal care, care for parents and grandparents, sports shoes, children's tuition and artificial intelligence subscriptions.

Gig workers brought in

A further measure worth noting is the RM160 million package co-financed by the government and Grab to lift net earnings and protection for ride-hailing drivers and delivery riders.

The Perkeso contribution incentive is set at 35 per cent, rising to 50 per cent where the platform also contributes, while Employees Provident Fund matching reaches RM600 a year or RM6,000 over a lifetime. BSN and Agrobank are providing RM270 million in financing.

The package recognises a social security gap for workers who have long carried their own occupational risk.

Development and housing

The benefits go beyond direct assistance. Sabah receives RM18.7 billion and Sarawak RM16.2 billion, including RM3.3 billion for road projects in both states, while Public Service Department sponsorships for Sabahan and Sarawakian students double to 4,200 a year.

Water supply, urban transport, rural roads, sewerage and internet projects are aimed at development gaps that have held back parts of the country for years.

In housing, the stamp duty exemption for first-time buyers is subject to a price ceiling and eligibility conditions, while the Syarikat Jaminan Kredit Perumahan guarantee rises to RM20 billion to help about 80,000 first-time buyers. That guarantee is a financing facility, not a cash grant.

A defensible direction

The budget balances its welfare agenda against the state of the public finances. The 3.3 per cent deficit target shows the government has not set aside fiscal discipline while expanding assistance and raising incomes.

How well any of this works depends on implementation, employers' capacity and economic performance. On policy direction, though, the 2027 budget offers a reasonable proposition: strengthen income through work, ease pressure through targeted assistance and build the infrastructure that widens economic opportunity.

Delivered efficiently, those changes could make growth mean more to ordinary households than a set of favourable numbers in an official report.